>> you mentioned briefly or touched on the role of economists in creating shareholder value. perhaps you have a view on the role of business schools in perpetuating it. >> that is another fabulous question. i find business schools are really schizophrenic about this. i can find professors at business schools and professors say we know this is true, we are so glad you wrote this book. other business professors to say you are absolutely insane, don't you know anything about economics? actually, i do know a lot about economics. remember, though would -- the woodrow wilson school degree and a 20 years of reading between? the problem is, at least based on the last 10 years, it is the finance departments in the business schools that have the prestige and power. one of the unfortunate

tendencies in business school curriculums is to allow shareholder value of ideology to prevail in most classes, and maybe there will be like one required class on business ethics or social responsibility, but create the notion that should be integrated to the business world, if we want our business world to thrive and we want to contribute to human welfare. >> right here, a question. >> i appreciate what you are saying. and the three solutions that i heard you offer -- is there anyone in public office that shares the same interest in what you are presenting that we can either contact or -- ?

>> yes, peter bareez -- peter de vries of washington state and tom harkin in the senate. i have just come to our door tom harkin because he is like a voice of rationality in understanding the economics and burnie of the legal rules -- and making sure we have liberals for the economy. and the transaction tax is being taken very seriously in europe and probably will happen there, even though the u.k. is kicking and screaming because they specialize in being the home of trading, whether trading in stocks or derivatives or anything else. they simply do not want that to be taxed. there are people in congress. i think wall street is now the number-one contributor to political campaigns. at least, it is in the running for number-one. i have been to washington many

times and i'm involved with several groups that are trying to reform the business sector so that it can work, so that it can survive. it is very difficult because of the sheer amount of money that the finance sector in particular is pouring into lobbying and campaign contributions. it is very difficult. >> let's give a round of applause for lin. -- lynn. [applause] there is an opportunity for you to purchase and have the but signed. if you have court-further questions, she will be here signing books. thank you all and have a safe trip home. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> all this month we have been talking with retiring congressional members. join us later tonight for a sixth-down we recently had with nebraska democratic senator ben

nelson. he served two terms and was part of the so-called gang of 14. that is at 8:00 p.m. eastern here on c-span. here is a brief look. >> what is your thought about the art of compromise and how much it is now viewed in this city? >> well, you know, is valued to talk about it. everybody back home want people to come back to washington and work together. and then they send people back here who have committed not to work together. that makes it very difficult. if you have in the senate in block of individuals who will not compromise and think of compromise as a for that -- as a four-letter word, which is not, then it becomes difficult to merge ideas and find compromises and accommodations in process or implementation as opposed to your principles. no one is asked to compromise

his or her principles when you are talking about compromise. maybe how you go about doing something, not exactly eliminating your view about one thing or another. i think the word compromise is over used, underutilized and misunderstood by an awful lot of people. it does not mean throwing in the towel. i have a couple of friends that i've talked to about compromises. in one instance, their idea of a compromise is when i see if there is a way. -- when i see it their way. >> you can watch the entire event tonight at 8:00 p.m. eastern here on c-span. and about 40 minutes after that, interviews with two retiring house members. a first, california republican jerry lewis, who shared -- shared the powerful operations committee, and later, democrat lynn woolsey, and officially

known as the matriarch of the anti- war movement within congress. >> i enjoyed that is straightforward, comprehensive. and you can really sense what is happening without a pundit interjecting. that is what i appreciate about c-span. it is a great resource for anyone looking to become more familiar with how government works and the ins and outs of capitol hill. >> julie seger on c-span on verizon. c-span has been brought to you by your television provider as a public service. >> next, it is a global look at the economy with a speech by greek economist. among his many books, the economics professor recently minotaur" andobal natar

we will show you as much as we can before the house gavels in at 2:00 p.m. eastern. [applause] >> ladies and gentlemen, france, -- friends, this is a singular honor to be a guest in this temple of civic life. thanks to all the good people for making this possible, to my publisher, the staff that are manning the barricades outside. my novel is debt crisis and the

future of the world economy. i will be arguing that there is no such thing as a debt crisis. there is no debt crisis in the united states of america and europe, and there is no such thing as the debt crisis in my own country, which is nevertheless being consumed by debt. you know the joke about balloonist. the balloon has been blown off isrse, and at some point they no such thing as a debt crisis. manage to gain control of the balloon and lower it above a farm. the farmer comes out and looks up at the balloon and one of the balloonists says, excuse me, sir, where are we? and the farmer says, you are in a balloon. the balloonist says, he must be an economist. precisely accurate, and hopelessly useless.

[laughter] we have a doctor here amongst us. imagine if you had a terrible case of a cancer patient in acute pain, and your diagnosis was, the person is experiencing a pain crisis. it wouldn't be useful. debt is a symptom of 2008, to be precise. it is what happens when a financial implosion begins on wall street, and then all sorts of dark forces break out, break loose, and they start dismantling the economic and social fabric of the world. these awful events happen once every hundred years.

our children were unfortunate enough that we had such an event a few years ago, back in 2008. let me be a little bit more precise about questions concerning debt. in this country, a whole spectrum of political opinion is pinpointing debt, especially federal debt, as a major problem. it is quite provocative, on my part, to be saying there is no such problem. that me explain why think this. after 2008, what has occurred, in this country and europe and elsewhere, is what i refer to as a twin peaks problem. one peak is this mountain of unsustainable, and recoverable

debt and irretrievable losses, primarily losses in the financial sector. one huge peak. you look at in you think, oh, my god, a debt crisis. then there is another peak behind it that is often not seen, overshadowed. but it's just as tall. it is 8 peak of huge, gigantic and savings with no place to go. the world we live in has the highest ratio of savings in the history of capitalism. we have accumulated profit and savings with nowhere to go, too fearful to be invested in productive uses, simply because of the crisis. this is the twin peaks, have been referring to.

when i say there is no debt crisis, i don't mean there is no debt. the debt is a huge problem just like a cancer patient has a problem with pain. but it is analytically unhelpful to be thinking in terms of the debt crisis. we might as well refer to the crisis we are going through as the savings crisis, a crisis caused by too much savings. you have never heard anyone from bloomberg refer to it as a crisis of a glut of money with nowhere to go, but it is, just as much as it is a crisis of debt. let's begin at the beginning. let's talk about debt. reading the mainstream outlets, newspapers, or listening to the idiotic stations like fox, you

would think that it is possible to have capitalism without debt. well, it isn't. once, it was possible to have an economy with debt that is marginal. recall feudalism. what was the process that led to the accumulation of wealth? it began with production. peasants work on the land. they produce wheat, corn, so production came first. then came distribution. that would come in and take a -- the sheriff would come in and take a large part of that mountain of corn for distribution between the peasantry and the gentry. eventually, you had financialization. the landlord would sell in the

rudimentary, marginal market, his surplus. and with the money, indulge in some money lending. so you had production, distribution, and financialization. and debt creation. but financialization came at the end and was not essential for production and distribution. with capitalism, what you had was the perfect reversal of the process. so how is capitalism different than feudalism? once the peasants were thrown off the land, they became landless peasants. some were kept by the landlord and given the task to organize production. usually, that was involved with

sheep and wool. it became an international commodity. it could be exchanged for silk in india and the silk exchanged for swords in japan, and those swords would be sold back in england and the whole thing would start again. so the ex-peasant who is now running the show on a small plot of land handed over to him by the landlord would be an entrepreneur. effectively, he borrowed money from the landlord in order to pay for three things. rent of the land, wages in the form of corn, to the ex- peasants who are now wandering in the countryside knocking on doors because they don't have

direct access to land, and some machinery, shears for clipping wool. so land, labor, and capital could be purchased in advance of production, on the basis that the entrepreneur, ex- peasant has to the landlord. -- on the basis of the debt that the entrepreneur, ex-peasant house to the landlord. so debt comes first, then comes distribution of income in the form of a labor contract. it will work for so many hours and i will give you so much corn. then comes production. it was a combination of this reversal of the order from having production followed by a distribution, followed by debt, to having debt first, then distribution, then production. in conjunction with the great improvements in technology that

unleashed the powers of capitalism, and capitalism manage to produce immense wealth, and at the same time produce poverty that had never been known before. the debt is to capitalism what hell is to christianity. unpleasant, but absolutely necessary for it to work. in a sense, capitalism is about ecological economics, even though capitalists don't want to hear this. it is about recycling. we had heard of the term by the 1970's, especially about the green movement in europe. capitalism has always been recycling. the process of described is a process whereby the entrepreneur is now forced to be an entrepreneur. the ex-peasants, they did not choose to be entrepreneurs.

they had to be. they used debt. bringing it to the present, energizing the production process, producing the wealth from which he hopes that he will be able to repay the debt. the moneylenders, later the bankers. cover for the fact that he had paid wages for capital goods. hoping there is something left for him, for profit. debt is all about intertemporal recycling. you take in value from the future and bring it to the present to create a lot more.

by effectively taking his hand and pushing it into the future, grabbing value that had not been generated. -- that is debt. producing the wealth, from which they hoped they would pay the debt. moneylenders, bankers. if you overreach from the present into the future, you cannot create enough value to generate the wealth that you need. it breaks down prepared --

it breaks down. covering the fact that he had already paid wages, hoping that there would be something left for him. the fact that there is recycling -- you take a value for the future, bring it into the present, so as to develop -- delivered the body to the future. the problem with this process is once you start it and it works, you make a lot of money out of it. and history suddenly starts being measured in terms of years instead of decades or centuries, because of what capitalism did. it accelerates through technology and wealth accumulation. it is like a machine to produce money. so, you want to use it more and more faster. the trouble is, if you overreach and take too much value from the future, you will create too much debt at some point. he will not be able to generate enough volume to deliver to the future. your recycling breaks down. there is the second problem, too. the places and the regions and sectors in which this dynamic capitalist process pushes the boundaries of technology to create wealth, those are the surplus riches. it started in manchester, in amsterdam. it is always localized. there will always be defecit regions and surplus regions. so, manchester northern england was in surplus back then. southern england was in debt. now it is the opposite. similarly, you have new york state in surplus, washington state in surplus. illinois, the dakotas in debt. missouri is your equivalent of in greece, a permanent bailout.

the thing is, whereas markets are amazing institutions for allocating existing goods and services among consumers, they are chronically bad at creating a balance between deficit and surplus regions. a geographic problem, and intertemporal. remember -- if that comes first, suddenly the money lender who later becomes a banker who later becomes wall street plays a hugely significant role in this process. the banker is the conduit of that recycling mechanism. when they get an increase in proportion as the result of their mediation of that process. given that, a failure of the

banker is not the same thing as the failure of a clothes maker. suddenly, there are two things that must happen. one, society will demand that banks are not allowed to go to the wall. then bankers are affectively given carte blanche, free money for themselves. and the whole mechanism breaks down like in 2008. it is often said in the eurozone, we made a huge error in europe of binding disparate economies by means of common currency. this is not the first time these if things that happened. it happened in the united states of america. you have disparate economies in the united states of america that are bound together monetarily. missouri and washington state are as different as germany and greece. what is it that keeps the united states together? you had a great depression here in the 1930's. things were awful.

and yet, i do not believe there were any political movements to get rid of the deficit states from the united states, like there are in europe and portugal and spain and everywhere else that happens to be in deficit. the reason is, the federal- state, especially after 1929 plays the role of the regulator of surplus and deficit recycling around the land. let me give you a simple example. we are in seattle. boeing is sponsoring the lectures. when boeing goes to washington to give a contract for the next generation jet or whatever, they may get it. they do get it. but there are some things attached.

like for instance, we want a factory that builds the wings are the engines in tennessee or missouri or arizona. in the deficit regions. this is not philanthropy. this is an act of recycling surplus so the surpluses of the surplus state can continue to be created, produced. you may recall that in the 1920s, internationally, we had a gold standard. fixed exchange rates. it is like having a single economy. -- a single currency. that gold standard creates a a degree of growth, together with the emergence of state corporations like edison that allows the bankers to run riot, and to reach far too much into the future to bring value to the peasant and to recycle.

and that is what led to the collapse of 1939, which was that generation's version of 2008. -- the collapse of 1929, which was that generation's version of 2008. when that collapse happened, what you had was unsustainable debts, irresponsible banking. you had the collapse of the currency. and nazis in parliament. it is what we have not now in greece, exactly the same. the generation that came to power in 1932 were exceptionally fearful of what would happen to the united states of america after 1944. because they very much feared that after the stimulus went through, after the stimulus of the second world war was over with the emergence of peace, the great depression would come back.

they have learned their lessons from the gold standard here. and they did what? they reconstituted, they reintroduced a system of global exchange. it was the bretton woods system. the dollar was the lynchpin. all the countries around the -- all the other currencies around the world were locked at this specific exchange rate into the dollar. but it would not repeat the error of the 1920's adjust binding together the economies of the world without having a mechanism to recycle surplus is around the world, but because it was that lack of a mechanism that brought about the disaster of the 1930's. those in power in washington in 1944 onwards were aware of the need for the surplus mechanism. interestingly, in new hampshire in 1944, there was a big clash

between people in the united states, and the british influence -- someone you may have heard of, john maynard keynes, the famous economist. both agreed that the global system of fixed exchange rates had to come with what was missing in the 1920's. and what was that? it was the global surplus recycling mechanism. but they disagreed on what one should look like. keynes represented the declining empire. the weakened, previously the dominant country recommended a multilateral policy. that is, create something like the united nations ora world bank. full representation. different countries on its.

he referred to it as and international clearing union, what i referred to as a global surplus for cycling mechanism. and we should all agree. but the united states said, no, mate. dollar surpluses, you cannot have any. none of you have any. you are all covered in ashes. the only accredited nation on the surface of the planet is the united states of america. i agree we have surpluses. we will recycle precisely the way that we choose and we are not going to start this recycling mechanism into a kind of united nations. it is indeed the case that from 1949 until 1960 onwards, the united states of america recycle 70% of its surpluses to germany and japan. an astonishing number. 70% of the profits in the country were recycled into

europe and japan. the marshall plan is a very small part of it. i will not bore you with details. but it was not an act of philanthropy. when they go to washington, it -- just like when boeing goes to washington, it is not a philanthropic act on the pentagon's part to instruct boeing to build. -- to build in the deficit areas of the u.s. it is pragmatic. the united states federal government -- unless europe is dollarized, unless they do not have dollars to spend purchasing -- unless those who do not have dollars are given dollars to spend purchasing, the net exports of those who have surpluses, then they will stop having surplus. this is the surplus recycling mechanism.

thus, we have the 20 years of the golden age. the 1950's and the 1960's. a period of immense stability very low inflation. very low unemployment. universal growth. we had other problems. the lease from the macroeconomic point of view, it was a golden age. why did it end? because the global surplus of recycling mechanism could no longer be sustained. why? because the united states stopped having a surplus by the end of the 1960's. how can you recycle surplus if you cannot have it. -- if you do not have it? enter a young turk in 1971. actually, he was the american, but you know what i mean. well, paul volcker -- that name may ring a bell. in 1971, paul volcker was an unknown working for another american. henry kissinger, who you may have heard of. before he became secretary of

state. he was still national security advisor. volcker's paper, which are when i read a few years ago, i thought it was the most remarkable document ever to emerge from washington in the last 50 years, 60 years. asked a simple question. now that america is losing its surplus, looking at the emerging economies of the world -- primarily germany and japan at the time -- how will we retain our hegemony? he said we could not recycle our own surpluses. we must recycle other people's surpluses. and this is what happened between the mid-1970's and 2008. the u.s. utilizing its trade deficit with the rest of the world has been operating like a huge vacuum cleaner.

sucking into the united states the net exports of europe, japan, and lately china. thus providing exporters -- germany, japan, or china -- with the requisite demand necessary. to keep the factories going. so, the ever expanding trade deficit was not an accident. it was a very clever way of replacing one that surplus recycling system with another. the first one, it was one where america had a surplus and america decided instead of doing what germany is doing at the moment -- which is cutting its nose to spite its face, and thereby entering into recession by cutting, cutting, cutting --

volcker and kissinger initially, and then volcker as the head of the fed had a different idea. we are going to expand our dominance and our wealth by expanding our deficit and using our deficits to provide the rest of the world with the demand which is necessary to grow their economies, even at the expense of ours. and who is going to pay for the deficit? if i have an ever-expanding deficit, the bank tells me it is game over. but if you are the united states of america and you have the reserve currency of the world, and certain other factors that i will touch upon later, what you can do is you can expand your deficit as long as you create the circumstances so that german entrepreneurs, later chinese, and japanese entrepreneurs, take their

profit, which they earned and they send it to wall street. thus closing the cycle, the recycling loop. so, effectively what we have between 1940's and 1971, 1973, you had global surpluses being recycled from united states to the rest of the world. the capitalist world. the western world. ok? so, the united states was an exporter to europe and japan. it was making profits. it was then recycling to europe and japan. so they would keep on buying. once the surplus shifted to japan, germany, and china, the idea that volcker had was a we will swap this. we will just turn it on its head. we will expand our deficit so they can expand their profits,

and thus it is self-sustaining and that their profits will come to the united states and will finance our deficits. and this is precisely how it worked. and the trouble was -- and if you want to understand exactly how the capital gains profits were attracted to the united states -- there are some key elements. one was, the commiseration of blue-collar workers in the united states. there were some key elements. one was the proliferation of states. that kept prices low. even with the oil crisis, prices in the united states rose more slowly than they did in japan or europe. so, if you were japanese or german, the profits, where do you invest them? where do you keep them? you keep them with the low inflation rate. that is one reason. one mechanism that helps attract the capital from the rest of the world and close the

loop. wall street was another. it has an amazing capacity to create a metaphysical value out of nothing. walmart was another. is promoted the ideology of cheapness, which was calculated -- encapsulated so brilliantly. nobody needs a gallon of pickles. i don't think it fits in a fridge. why was walmart producing it? i think it was a symbolic gesture to establish the importance of low prices as an end in themselves. and in the process squeezing labor costs here and elsewhere and creating the circumstances for profit rates to rise higher and faster to attract german and japanese capital into the united states of america.

now, what do you think bankers do when you give them $5 billion every day net? to play with, even if it is only ten minutes a day? the get $35 billion -- this is the tsunami of capitalism. -- of capital coming from europe and asia. on average, every working day, monday through friday on wall street, $3 billion to $5 billion net. it was flowing into wall street banks. what do they do? i will tell you what they do. they find a way to make it grow for themselves. it is natural. it is in the nature of the beast. that is what bankers do. now, we can spend countless hours discussing how they did it. one word captures the process -- financialization. i call it production of money, if you want, toxic money. all those derivatives, swaps,

paper titles that contained intricate and sophisticated and intricate forms of debt. it is being utilized by banks as a means of exchange as though it has value. it uses them, changes them amongst themselves, in order to store value that was going to the bankers in the form of bonuses. how do we define something that works as a means of exchange that has value? money. effectively, bankers were given a license to print. it is as if they manage to discover an atm in their own living rooms that did not go to any bank account. what would they do?

they would keep using it. i do not know about you, but increasingly, especially if nobody noticed. that is why they want to cash their share options. what is it? how do we define something that works as a means of exchange and total about you? money. the effective rate, bankers were given the license to print. it is as if they managed to discover an atm in the living room. account. therefore, what did they do? if i had one of those, i would keep using it. i cannot know what i would do, especially if nobody noticed. ok? you know, i mean, the problem with crises like the one we have now is there are multiple explanations for its. so, you hear a lot people talking about the fact that wall street bankers captured the politicians and regulators, and that is true, and thereby managed to avoid scrutiny. all the regulations set up in the 1930's were being swept away by people like mr. rubin and mr. geithner in the 1990's. administration. that is true. agreed. -- people talk about greed. greed is good. hollywood movies are about greed. against it. instead, wall street bankers were imitating gecko, like war movies that create warmongers.

at the same time, you had another explanation which had to do with the way in which the finance tapped into computing power to create complex derivatives. all that is true. but what is underlying this and the crisis and the reason why the world economy fails to recover is that this surplus recycling mechanism -- this weird, wonderful, audacious surplus recycling mechanism from 1971 which paul volcker helped put together is the chairman of the fed in the late 1970 fell and 1980's, it broke down. in 2008, when lehman brothers broke down, and the others followed and had to be bailed out by you, what happened was the united states of america lost its capacity to utilize

its trade deficit in order to recycle other people's profits. if you look at the data analysis, and i am doing so in the context of the second edition of this book, you'll find an astonishing empirical datum. the united states is producing 30% less demand for the world's manufacturers than it was in 2007. 30% is a big reduction. at the same time, remember recycling? the rest of the world -- whereas in 2007 they were financing the united states corporations to the tune of $500 billion a year, and now they are taking out $50 billion. so, america is not producing demand for foreign manufacturers and foreign manufacturers are not sending their profits to united states.

56% reduction in assets held by non-u.s. residents in the united states since 2008. so, that loop that operated so magnificently has broken down. the reason why europe is in such a shambles and the reason why the united states is failing to recover and the reason why the dragon is angst-ridden in china is we have lost about $1 trillion every year up demand for production globally. we lost it because the surplus mechanism is broken. united states found a mechanism in 1944 and recreated in the 1970's. in a very strange way, in a very unbalanced way, but nevertheless did. since 2008, we have not managed to regain our poise. the mechanism broke down.

the emphasis about the public debate on debt is the homage austerity pays to philanthropy in order to maintain what i call the new regime we live under, which is not capitalism. capitalism died in 2008. i'm an old left-winger. when i was growing up, i was having these very nice debates with liberal right wing sectarian -- they were debating about capitalism. they said capitalism is like the jungle. they said it was all about the survival of the most efficient and significant. the left argued central planning is better, you know. more just. in 1991, the soviet union died. the left died.

in 2008, capitalism died. if it is true that capitalism is a social darwinist game that gives rise to the survival of the fittest, what happens in 2008 when we have the survival of the most bankrupt? that is hypocrisy. not by banks, but by bankrupt banks. and the more bankrupt you are, greater your power for the destruction of wealth to your society. so, this emphasis on debt is nothing more than a conspiracy in order to exploit prejudice and fear. and ignorance. because if i am right the what we have here is a breakdown of surplus recycling, which has a symptom of lot of debt and a lot of savings, and the two wipe out one another, this emphasis

on debt is the revenge of herbert hoover and nothing more than that. if we look at one of the twin peaks and not at the other and cut down on debt, all we manage to receive its increased debt. like we are doing in greece. in greece, we've had the most brutal, a substantial fiscal squeeze and in the history of humanity. if you look at the numbers, and nowhere before as the budget -- has the budget been squashed so savagely. and what happened to the debt? 129% to 200% of gdp. it is what happens. when you kill the cow that produces the milk, it will not produce more milk and if you keep hitting it, it will not produce more.

the problem with the economy is, we need to start recycling global surpluses again in a rational way. the great advantage of having no qualms about lying through your teeth as politicians in this country and in my country have been known to do -- the story that i have been trying to tell is quite complicated. you can use simplification in order to confuse people. when in being interviewed by the media, you have about 20 seconds. you have to answer the question of what is wrong with the world. if you say, well, we have too much debt. we will become the slaves of the chinese like these awful advertisements -- that is completely wrong. you can just go like this. it is all over and done with. it is a story with a beginning,

middle, and end. you can tell it in 20 seconds. my story, i have been talking and fast for such a long time, and i have still not managed to piece it together fully. what i have been telling with a colleague of mine and friend -- we were trying to think of a metaphor. and the metaphor that i thought of was the global minotaur, which is the title of the book. one of the few advantages of being greek is you have a great wealth of mythologies, of myths to tell the story. by which to tell a story about the world. so, i'm going to finish off by reading one page -- i am trying

to save on paper. i have it on the phone. it is the story of the global minotaur. what i am going to read is dear to my heart. one of the great joys of publishing this book is it appeals to people who do not know anything about economics and therefore are much more sensible than we economists are. one group of gadgets from the -- one such group of people were a group of graduates from the royal college of the arts want to create an animated story out of my book, and they asked me to write the script. allow me to read the script. it is how i am going to finish. see if you can recognize in this little story, which i was just dipping into greek mythology, the broader economic story that i have been relating to your support.

-- to you so far. ok. once upon a time in the famous labyrinth of the king's palace, there lived a creature as fierce as it was tragic. its intense loneliness matched only by the fear it inspired far and wide. you see, the minotaur had a voracious appetite which can only be satiated with flesh. this guaranteed the king's reign. the king, who secured peace, the one who enabled trade to crisscross the seas with bountiful ships and spread prosperity around the world. alas, the beast's appetite could only be satiated by human flesh. every now and then by ship loaded with young slaves was -- with youngsters saved from far away athens bound for crete to

deliver its human tribute to be devoured by the minotaur. a gruesome ritual that was essential for preserving the peace and producing trade and prosperity. many years later a global minotaur rose up from the ashes of the first postwar phase, the one created by america from the ashes of the war. it is there -- a form of labyrinth was greeted deep in the american economy. it of the form of the united states trade deficit which consumes the world's exports. the more the deficit grew, the greater its appetite for europe and asia as capital, and what made it truly global with its function. it took financial capital and surplus money, and kept the

cleaning german factories busy. it help recycle financial capital. it gobbled up everything produced in japan and later in china. and for the american owners of these distant factories, they said their profits to wall street, a form of tribute to the global minotaur. what do bankers to when such a tsunami of capital comes their way daily? between $3 billion and $5 billion every week. they find ways to make it grow, to read -- to breed on their behalf. the us in 1985, 1990's, you saw an explosion of money minting on the back of the daily capital tsunami that floated to feed the global minotaur. just like its mythological predecessor, the global minotaur has kept the economy going for decades.

until the pyramids of private money built on the tribute collapsed on their own weight. planet earth was simply not large enough to hold it so much private toxic money. money like a paper that burns down once the collapse begins. in this confederation, the -- in this conflagration, the global minotaur was wounded. while in rude health, the minotaur formed new forms of pleasure and new forms of deprivation. ample security for a few and spectacular insecurity for most. creating spectacular failures of common decency. whatever we think of the global minotaur's reign, he kept the world going and thinking its regime was stable, moderate even.

meanwhile, its gross excesses' remained out of sight. until some believe their own rhetoric -- read ben bernanke -- about moderation. but when the global minotaur was mortally wounded, it left the global economy in disarray. it has put the world in permanent crisis. the minotaur was slain by a brave warrior named theseus. its death ushered a new era of tragedy, history, philosophy. our very own global minotaur died as the victim of wall street bankers. what will its demise bring? should be hope for a new era in which wealth does not require

poverty? will be develop a system where no longer will abstract power waned while others get stronger? the global minotaur will be remembered as a remarkable piece -- beast to whose rain created and destroyed the illusion that the global economy was stable. breed a virtue. -- greed a virtue, and finance productive. thank you. [applause] right. questions? i think i am going to moderate myself. ok, you have to line up. this is the way you do it here, isn't it? >> that is a brilliant vision of where we have been. can you elaborate a little bit more on where you see us going?

>> very briefly, i think that we are in a state of sustained bewilderment. because, let's face it. in the 1930's, the new deal, despite some early successes failed by 1936 or 37. 1938, we have the second great depression. it was only the war that managed to do the recycling the new deal failed to accomplish, due to fdr's backtracking. now we have a world economy which conceivably, that technically finds its way forward to plug the gaps and black holes. 20the g-20 easily agreed to a plan that is very much like that which john maynard keynes proposed in 1944. but it is unlikely they will. it is a comedy of errors.

the european leaders are competing to produce a plan that is more idiotic. they are so entrenched. they are so parochial. -- they cannot see beyond their own little squabbles. they have a horizon of 8 months to the next federal election in germany, for instance. greece therefore is the sick person europe. of the world. meanwhile, the united states of america is ungovernable. you have a system in this country that was created to create this country as an ungovernable state. you have congress, the president canceling each other out. how the president -- whoever the president might be -- do anything? how can he lead in the g-20, like truman and others did before? you have china -- finding it

impossible to provide a replacement for the demand that the west has done away with. so, i do not have an answer for your question. bewilderment. >> my question is about consumer demand and the extent to which the old system depended on it. if we do not have it to the same degree, could there possibly be a new economy? i cannot know how to say all of these in the right economic terms. i will say what i am thinking and see what you make out of it. its teams like all the economy's -- it seems like all the economies got to a point where it had to be based on growth. it could not just be sustainable. it had to grow. and that meant more consumers. so, then, that led to a lot of things ecologically that were not good for the earth's, things that people did to maximize profits. and reduce costs and all these

things. so, that is one thing. is there the possibility there might be a new economy that is not based on growth? second, if you do not have consumer demand at the same level that he used to -- and of course, i think that is why. -- i think that is whyone of the pieces that you talked about is that americans are credible consumers come away more than europeans. i went to a store today, and there is so much junk americans will buy and other economies will not. what if consumer demand has changed? and the third thing is, in my own work i deal with a lot people that are getting divorced and not paying their mortgages. for the first time in seeing people say, we just won't pay our mortgage. and that would be unthinkable. previously people would do anything to save their home and their credit. now people do not care. all the time. they say, we just won't pay our mortgage, and they do. so, i think the consumer attitudes about consumption and

debt are really different as a result of this crisis. i do not know of any of that means anything. >> do we have a couple of hours? it is very important to draw a distinction most economists do not draw. or have not been drawing for a very long time. this has been a calamity for the planet earth. the distinction between growth and development. is one thing to say we want development and another thing to say we what growth. growth is often at the expense of development. so, do not believe in growth of co2 or poison or toxic derivatives. >> we're going to break away to go live to the u.s. house of representatives. you can see this in progress -- this program in its entirety

online c-span.org anytime. /videolibrary. the house is about to gavel in for a pro forma session. no legislation is scheduled. the house is standing by to consider any agreement regarding that looming fiscal cliff. members have been promised 48 hours to review any deal before it goes to the floor for debate. let's take you live to the floor of the house. we see them just about to walk in the door. a quick reminder, we are expecting remarks from steny hoyer in about 20 minutes. we plan to bring you those lives.

[captioning made possible by the national captioning institute, inc., in cooperation with the united states house of representatives. any use of the closed-captioned coverage of the house proceedings for political or commercial purposes is expressly prohibited by the u.s. house of representatives.] the speaker pro tempore: the house will be in order. the chair lays before the house a communication from the

speaker. the clerk: the speaker's room, washington, d.c.,, december 27, 2012, i appoint steven latourette to act as speaker pro tempore on this day, signed john amplete boehner. speaker of the house of representatives. the speaker pro tempore: the prayer will be offered by our chaplain, father conroy. chaplain conroy: god of all creation we give you thanks for giving us another day as this chair lies silent still we pray for hope as americans experience anxiety about their future. send a spirit of wisdom and good judgment upon the leaders of congress that they experience peace on earth among all good men and women. this is for your greater honor

and glory, amen. the speaker pro tempore: the chair has examined the journal of the last day's proceedings and announces its approval thereof. pursuant to clause 1 rule 1, the journal is approved. mr. kucinich: join us as we pledge aliegesance to the flag. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god, indivisible with liberty and justice for all.. the speaker pro tempore: for what purpose does distinguished majority whip, the gentleman from maryland rise. mr. hoyer: ask to address the house. the speaker pro tempore: without objection. mr. hoyer: thank you very much, mr. speaker. we are in pro forma session. pro forma session is a session

without substance or solutions. we have much to do, mr. speaker. millions of americans returned to work yesterday, millions more returned to work today after taking off time for their holidays. mr. speaker, we have, as you well know, a long list of expiring items this house must complete before the end of the year or it will have adverse consequences to our people. first, i want to say, mr. speaker, you are one who has been working very hard to assure that we reached solutions, and i want to thank you for that. some of us are here in this chamber today, but very frankly, all of us ought to be here in this chamber today. all the republicans and all the

democrats. working so that our people have confidence that although our challenges are tough, that we are at least here trying to reach a consensus on solutions to those challenges. mr. speaker, as you well know, on january 1, middle-class taxes will rise, indeed taxes on all americans will rise. mr. speaker, you are also aware that we have legislation that has passed the senate overwhelmingly on a bipartisan 68 to 31 vote to address the issue of violence against women. postal reform, legislation passed the senate on a bipartisan fashion. we have a farm bill, mr. speaker, that has passed through the senate on a bipartisan fashion and passed out of the committee in this house in a bipartisan fashion. we are facing sequestration on

january 2 that every member of this house believes is an irrational alternative. we have many of our fellow citizens battered by sandy, one of the largest storms to hit the northeast ever. the senate is now considering a foreign intelligence surveillance act piece of legislation to keep our country safe and secure. we have doctors who are worrying about whether they will be reimbursed for their medical expenses that they deliver to senior citizens. we have an alternative minimum tax that will expire on december 31, resulting in a tax increase to many of our citizens, tax extenders that have not been extended. a jobs bill that the president has asked for has not been considered much less passed. mr. speaker, we ought to be

here, working. addressing these challenges. everywhere, mr. speaker, that you and i go, i know, we hear, what are you doing on the fiscal cliff, or i hope you're working hard on the fiscal cliff. i must tell them we're not working. we're not here. we're not addressing the challenges that i have just mentioned. mr. speaker, i would hope that the speaker of the house will call us back immediately to address these challenges. we have four days left to go. before the end of this year, before all of those items that i spoke about expire. the sequester happens the second day of january. we ought to be here working, mr. speaker. we're not. this is a pro forma session. as i said in the beginning, a pro forma session is a session

that is without substance and without solutions. i would urge the speaker of this house to call us back in session to do what america expects us to do, address the challenges, find solutions, come to agreement, make compromises. make democracy and america work and give confidence to our people and to our economy. i hope, mr. speaker, that the speaker will do that and will do it today. and i yield back the balance of my time. the speaker pro tempore: the gentleman's time has expired. i thank the gentleman for his kind words and saddened that it came in a session without substance. the chair lays before the house a communication. the clerk: the honorable, the speaker, house of representatives, sir, pursuant to the permission granted in clause 2-h of rule 2 of the u.s.

house of representatives, the clerk received the following message from the secretary of the senate on december 27, 2012 at 11:19 a.m., that the senate passed without amendment h.r. 1339. that the senate passed with an amendment h.r. 4212. that the senate passed without amendment, h.r. 5859. that the senate passed with an amendment, h.r. 6364. that the senate passed senate 3709. that the senate passed without amendment, h.r. 1845. signed sincerely karen l. haust. the house shall adjourn to meet at 2:00 p.m. on monday, december 31, 2012. without objection, the house stands adjourned

>> that wraps up to date's pro- forma session. we also heard that senator scott brown had confirmed that report. white house sources are vehemently denying that. the white house saying they have not sent up any bill or any built up to capitol hill today. we expect to have a question comes up when steny hoyer talks with reporters. that is supposed to happen in about five minutes. we will have live coverage when the minority whip speaks to reporters. in the meantime, we will bring you harry reid who opened the senate session this morning with comments on the situation, and we will hear what he had to

say about the fiscal cliff now. : new year's eve is fast approaching and for decades and decades the american people have watched the ball drop in times square. it's the countdown to midnight, the start of a new year. but this year, mr. president, the american people are waiting for the ball to drop but it's not going to be a good drop. because americans' taxes are approaching the wrong direction. come the first of this year, americans will have less income than they have today. if we go over the cliff, and it looks like that's where we're headed, mr. president, the house of representatives as we speak with four days left after today before the first of the year aren't here with the speaker having told them they'll give them 48 hours' notice. i can't imagine their consciences. they're out wherever they are,

around the country, and we're here trying to get something done. they are not in washington, d.c. the house of representatives are not here. they couldn't even get the leadership together yesterday. they had to do it with a teleconference. the republican leadership republican leadership. if we go over the cliff, we'll be left with the knowledge that it could have been prevented with a single vote in the republican-controlled house of representatives. mr. president, prior to this session starting today, the presiding officer and i had a conversation. about how things have changed around here. i served in the house of representatives. there are 435 members of the house. what goes on in this country shouldn't be decided by the majority, it should be decided by the whole house of representatives. everyone knows including the speaker of the house of representatives today that if they had brought up the

house -- i'm sorry, the senate-passed bill that would give relief to everyone making less than $200,000 a year, it would pass overwhelmingly. every democrat would vote for it and republicans would vote for it. but the speaker, he says no, we can't do that. it has to be a majority of the majority. so they have -- they've done nothing. he even tried to bring up the bill last week to show they could defeat it. they couldn't do that even. they couldn't defeat the bill that passed here in the senate. the american people i don't think understand the house of representatives is operating without the house of representatives. it's being operated with a dictatorship of the speaker, not allowing the vast majority of the house of representatives -- the representatives to get what they want. if the 250 would be brought up, it would pass overwhelmingly, i

repeat. on any given day for the last five or six months, since july 25, speaker boehner could have brought the senate poifd middle-class tax cut legislation to a vote in the house and it would pass. but he's made the decision he's not going to let a vote on that because if he led he let it be voted upon, it would pass. i've said here, mr. president, it's not too late for the speaker to take up the senate-passed bill, but that time is even wiping down. today is thursday. he's going to give 48 hours' notice to the house before they come back so 48 hours from today is saturday. with just that one vote, middle-class families would have the security their taxes wouldn't go up by at least $2,200 on new year's day. that's the average. some would go up more, some less, of course. speaker boehner should call members of the house back to washington today. he shouldn't have let them go,

in fact. they're not here. they are not here. john boehner seems to and takell break away, whe you live to capitol hill. >> a pro forma session is a session without substance and solutions. america is looking to its congress for both. it is certainly looking to congress to be working. i said everywhere i go people ask me and urged me with hope in their voices, i hope you are working on that fiscal cliff, i hope you are getting the situation that we are not going over the fiscal cliff. sadly, i have to tell them that we are not there, we are not here, we are not working. every democrat, every republican

ought to be here. the speaker ought to call us back into session. it is not as if we do not have a lot of work to do. in fact, we have a lot of work to do. secretary geithner sent a letter to me and others yesterday and it was reported in the paper today that america will reach its debt limit on december 31. that needs to be dealt with. so that we can maintain the credit worthiness of this nation, so we can give confidence to this economy. in addition to that, there is much other business to do. over the past weeks, majority leader kantor said the house would do the work necessary to finish the items we needed to get done by the end of the year. i talk to mr. kantor today, and urged him to have us come back. they are having a discussion about that, i think, at 2:30 he,

shortly, the republican conference on a call. i hope they conclude as we have concluded -- and i speak for leader policy and myself and all the democratic leadership -- that we must come back as soon as possible to work together to reach compromises, to ensure that we address the important legislation that is still pending in this congress. a congress which i believe has been the least productive, most confrontational, at least compromising congress in which i have served, and i have been here since 1981. the senate tomorrow will consider the sandy supplemental legislation. hopefully they will pass that tomorrow or by saturday. certainly, the house of representatives needs to address that supplemental to give relief to those that were

savaged by sandy in the worst storm that has hit the northeast perhaps in history. the violence against women act passed senate overwhelmingly, something that we could work on today. the farm bill expires on december 31. milk prices will spike substantially if that bill is left to expire. mr. cantor indicated that would be addressed before we left here at the end of the 112th congress. that is some six days a week off for days until december 31, obviously. foreign intelligence surveillance act, to make this country -- to continue making this country safe and secure and and power our people to protect us for those who would harm us, that bill is being considered on the senate today come on the floor. the senate is here, working.

the house is not. we had a pro forma session. a session without substance or solutions. postal or four passed overwhelmingly in the senate. we can address that issue as well. the alternative minimum tax will expire on december 31, resulting in a tax increase for working middle-class americans. so that as well as the middle class tax bill that the senate passed and it only got to the floor because on a bipartisan basis the senate agreed it would come to the floor, and it passed and is pending here. we could bill -- bring that bill to the floor today if members were called back and we were here. notice was sent the day before christmas. we could be considering that bill today and passing it so

every working american and indeed every american would know that their taxes would not increase on the first $200,000, individuals, or $250,000 as families. 100% of americans would not get a tax increase on that income. we could be working on that and passing it today. on two separate occasions this month, cantor knowledge did necessity of completing the farm belt. i would hope that we could come back here and reach a compromise which has been so difficult to do. last day of this session was a perfect example of my way or the highway. john boehner had the temerity to suggest a little bit of a compromise, not much of one, and one he knew could not pass the senate.

even that small step was rejected by his conference. the american people have a right to be very upset with this conference, that we are not carrying out the business that is before this country, that we are not meeting our responsibilities to each and every one of them and each and every family, each and every business. and addressing the challenges that they know are before us. i have never seen a public as energized or as knowledgeable about an issue as they are the fiscal cliff. i do not mean that they know every paragraph, sentence, and ramifications of the failure to stop going over the fiscal cliff, but they know it will not be positive. they know it will have a negative impact on the economy. and they know it will have a negative impact on them and

their families, and they are expecting us to be here to work and were not. i just observed on the floor that tens of millions of americans went back to work yesterday from having taken off probably a fort-day holiday for christmas. they went back to work on wednesday. millions more went back to work today. their representatives in the congress of the united states, unlike the united states senate, did not go back to work. and have not gone back to work. and that, correctly, is concerning our people. we have four days to avert a crisis that could harm our fragile recovery, cost us a credit downgrade, impose arbitrary spending cuts that will undermine our national modelty and slash

programs for the vulnerable. i hope the speaker and his republican party will be here with democrats, working to finish the task before us in reaching an agreement to avert the fiscal cliff. democrats are ready to work and, yes, ready to compromise. we understand we will not get it all our way. the legislative process is about compromise, democracy is about compromise. we have not done much of that this year, and frankly that house has been an extraordinarily pardontisan house where we passed legislation after legislation which the leadership knew it would not be adopted by the senate and the president would veto it. that has not been a constructive experience for the house or constructive experience

for america. dayould hope the speaker to would call the house back into session to address these serious challenges confronting our country and giving confidence to our people, that their government is at work, that their government can work, and that their government will work. thank you very much. questions? yes. >> did you get a communication from the majority leader that they would be coming back? >> they would be discussing it today. i know they are discussing that issue. very frankly, the house has to initiate revenue bills. the house failed to send a bill out, as you know, last week, because the republican party

could not come to an agreement. so i do not have a representation as to what they are going to do. i do know they are going to be discussing it just in a few minutes. >> what would you say [indiscernbile] >> i would say the most preferable path forward is to get us back in session, come here, sit down at the table, and reach a compromise agreement. an alternative, which is the simplest, pass the senate bill you want to correct a glitch in the senate bill from a procedural viewpoint, it will pasts the house, which will include a tax decrease on the first $200,000 of income of an individual, or $250,000 for a family. we could do that immediately.

>> you talked about talking to cantor and reid. you talk to anybody at the white house from their latest? we understand they may be sending up some proposal on what they could expect. >> i have talked to the white house. i have not talked to the president. i know they are equally concerned about this fiscal cliff and about the expiring items. i did not mention it, but one of the things that we ought to be concerned about is that unemployment insurance for millions of americans expires on december 31, and that will leave millions of families without the assistance that they need because they have been unable to find employment. why no the president is considering what options are -- i know the president is considering what options are available, but i know they are considering options.

>> can you give an example of what other options they are considering? >> i do not want to go there because i do not want to preclude the white house from determining which options it wants to fall by mentioning some that i think they are considering. i will wait on that. >> and about options in general? >> fiscal cliff options and things that are expiring. i mentioned the sgr, which is critical. we need to act on that to give doctors confidence that they are going to be reimburse for the medical care they get. >> yesterday geithner said the u.s. will reach the borrowing limit at the end of the air and will take extraordinary measures. you know what that will entail? >> historically, that has been done by presidents of both parties, so this is not an

unusual event. what is unusual is we have seen this congress, this majority, this republican majority willing to take us to the brink of default. that resulted in the first time ever a downgrade in america's creditworthiness by the standard and poor's cut by one point, but nevertheless a downgrade. i am in the warren buffett camp that believes this is a vote that is a fraudulent vote because it is a vote to say that america will pay the bills it has already incurred. now, i think all that ought to be a no-brainer. i think every american would want its country to pay its bills, and we have the ability to pay our bills. i would hope that that would be taken off the table as an issue of partisan divide or used as leverage. it is somewhat like taking your

child hostage and saying to somebody else i will should my child if you do not do what i want done. there is no republican leader that does not want to default on our debt. that should be nonpartisan. taking care to pay our debts for a period of time, and it is not endless, it perhaps is through january and maybe into february, that will be possible, but we should be acting on the debt limit before that, should be acting on it in a bipartisan method. both parties have used this as a partisan talking point. the difference is that no party up until last year, 2011, used it as something they thought was real, that resulted in a downgrade of america's credit rating. >> what are you convinced the house will be able to pass the senate-passed bill when the same

language was brought to the house and auguste, and if it would pass the bill, it would not address sequestration, the debt ceiling, tax reform, a whole host of things? >> if you have 10 problems, solving one problem is not bad. solving 10 is wonderful, but you ought not to have the solving of all of them the enemy of solving any of them. the reason i think it will pass today is august is a long time ago. four days from now, working americans will get a tax increase, and that is not something -- [phone rings] excuse me. i should have heard about before i got here. i did not look to see who it was. we could have a number of options, i suppose, we could

present, so i am convinced it would pass because this is 4 days away, and i think there's nobody that i have talked to, maybe 1 or two, there are almost nobody peptalk do that does not want -- nobody i have talked to that does not want taxes on average working americans not to go up. nobody i have talked to. nobody wants them to go up. the dispute is about over $250,000. if you put a bill on the floor that and nobody over $250,000 would get a tax increase and not everybody would agree with that proposition, i think it would pass. >> the leader talked about what he thought was the motivation for boehner's not calling the house back in it, try to protect his speakership.

you have been in a similar situation. what do you think of that assessment of boehner's motivation? >> i do not know if i have been in quite a similar situation because in the congress in the last congress, and which we were in charge, as you recall we were successful in getting 218 democrats on every major proposition. we failed on one instance. i do not think i have been in that position, but i do not want to speculate on the speaker's politics within this conference. what i want to urge speaker is in respect of the politics, america is expecting substance and america is expecting addressing issues of consequence to them. they do not really care about our politics internally in house. but they care about is the failure to act said that they

will be protected from tax increases and from other adverse consequences of a failure to act. thank you very much. [captions copyright national cable satellite corp. 2012] [captioning performed by national captioning institute] mary christmas and happy new year. -- merry christmas and happy new year. >> holiday greetings there from minority whip steny hoyer. you see the phone numbers on your screen. turn down your tv and let us

know what you think about the fiscal cliff. we will talk to chris in houston. you are on c-span. caller: i wish boehner and the republicans -- i am a libertarian, but i take the side of the conservative republicans on the fiscal talks. i just wish that john boehner and mitch mcconnell would have some more backbone and the tables and say we heard. read about blaming republicans, and boehner said it on the senate floor, but they need to come to the podium today or tomorrow and say senator reid, we recently passed two bills are sitting on the fiscal cliff cristeta sitting on your desk and you have the audacity to blame republicans. i think they're both to blame someone. reid a little more so.

we see what happens. obama has led this country. he is about to lead us into another debt downgrade. it should be evident to see what happens when you let partisan democrats like harry reid and nancy pelosi call the shots. >> marty, you are calling on the democrat line. what is your reaction? caller: the president needs to get the republicans come back in from christmas holiday. >> what do you think is gonna happen? >> we are on the verge of a fiscal cliff and they are still on vacation. >> let's go to mike in texas, on our line for republicans. >> i agree with the first guy.

i wish they would have a little backbone and force obama and reid into not giving in to them. they need to set a budget and stick with a budget, and what they are trying to do is they want more money so they can increase the debt again, and they are about to run this country, as far as i am content. host: out the you think this will end up? caller: i hope boehner holds to his guns. i think the million-dollar deal is a good deal where anybody making over a million dollars pace a little bit more money, but i do not buy that $250 deal. host: that's good to marry in florida. c-span.e on

caller: i believe the average american should not have to pay taxes. caller: you are going to need to turn down your tv, ok? caller: i do not have been on. it could be somebody else playing district. -- playing this trick. host: we will stay in florida and go to venice. did you see what minority whip hoyer had to say? caller: yes, i did, and being a democrat i go along with president obama's plant, but if it came -- plan, but to avoid

the fiscal cliff, if nothing else works, we should avoid the fiscal cliff and he should be the big compromiser and not tax the rich in order to get the bill through. if he gets the bill through without pulling the fiscal cliff, our economy will improve the tax revenues from that will be more than he would get from the rich now. host: appreciate the call. let's go to oklahoma, a line for republicans. caller: i am so disgusted with both political parties. it seems they are putting their party before their country. and i want these politicians to know they are the ones that have been up there for years and spent all this money and now the average person will be the one who will have to pay, and i

believe they are being bought off by the 2%. right is right, wrong is wrong, and to take away from the needy and cut food stamps from people who qualify -- it takes an act of congress to qualify. i cannot understand that these people are protecting the 2% of the country. host: jefferson city, missouri, you are on. go ahead. caller: yeah, i think boehner should be removed from the speaker of the house, and president obama should be in and his entire staff, including hillary clinton. i do not know if you have noticed but nancy pelosi, her eyes are consistently dilated. host: thanks for your call.

let's go to indiana. caller: i think it is unfortunate boehner wants to tax people making over $1 million. [indiscernbile] this is the result of 30 years of reaganomics, and the republican party has left people with less fiscal responsibility and they have not paid for the two wars, medicare part d, not to mention the tax cuts. host: how does it end? caller: if people did not wake

up and try to do what is right for future generations at will and worse. the republican party will not compromise for anything. it is not the dwight eisenhower party that had the 93% tax rate. you put the money into the interstate highway system. even abraham lincoln created land grant universities, and that was not called socialism. it was called advancing the future. host: we appreciate the call. let's go to illinois, catherine on our line for republicans. caller: yeah, hi, this is catherine. i cannot have twitter, but i would like to get something going. class --'t the middle if they cannot pass this, just take off certain exemptions on

their s2 form -- w2 form and did not pay their taxes, the deductions now and not pay their taxes? is the government going to come after the whole middle class for doing this? we should just take a revolt. that is all. the government does not want to come to terms with this and past something for us? we spoke. that is all i have to say. host: last word from rick in pensacola. caller: thank you. in 2006 i became an independent. i had been a republican my entire life. i was disgusted with the way they governed. that pales beyond what harry reid and obama are getting away with. it is incredible that republicans have allowed democrats to find issues.

-- to define the issues. it is amazing to me that harry reid who has not passed a budget in three years, boehner is not up there raising heck about it, it does not make sense. republicans wonder why they squandered. i do not know if you heard or i guess you played it, harry reid's speech on the floor of the senate this morning, why wasn't mcconnell up there right after him? but, should have been up there making a response. republicans -- they are suicidal, and it is a shame. my last statement will be we do not need a compromise, we need term limits, 12 years, two six- year terms for senators and that is the only thing that will save our nation, get those guys out of here and get some fresh blood

in there. thank you very much, and have a happy new year. host: thank you very much for your calls. also, a special web page we have set up for you at c-span for all things related to the fiscal cliff. you can watch video of hearings and briefings, also a live twitter stream. the resource area also has documents and links, all at c- span.org/fiscalcliff. >> it is straightforward, comprehensive, you can sense what is happening without a pundit interjecting, and that is what i appreciate about c-span. it is a great resource for anyone looking to come more familiar with how government works and the ins and outs of capitol hill.

>> julie seger watches c-span on verizon. >> on the subject of the fiscal cliff, we spoke to steve forbes this morning and got his take on the subject. host: joining us now is the chairman and editor in chief of forbes media, steve forbes. he will be with us for the next 45 minutes to take your calls. let's start with where we started this morning on "washington journal." have you looked at the fiscal cliff and have you made plans or altered your 2013 spending as a business owner on this issue?

guest: the answer is not yet. the big factor will be what happens in health care, which kicks in it in 2013 and 2014. you're kind of immobilize until we get a fix. we are moving ahead on the projects we are doing. people are being cautious. we hope this thing will be successfully resolved and that we do not go into a recession next year. host: how would you like to see this issue played out in washington? what is the best economic solution? guest: the best economic solution is to avoid raising taxes. the best we can hope for is that they kick the can down the road for a couple of months.

you are not going to resolve entitlements in the next few days. some of these issues will take serious discussion. it will probably be february and not december 31. that is on the horizon. try to do it in a more deliberate fashion. that would be better than doing a quick deal. that is a habit in washington. host: like is it important not to raise taxes on anyone? guest: the u.s. economy is still wobbly. southern europe is in a severe recession. germany and france are about to go in recession.

when you have a shaky economy, piling on taxes does not work. spain's has been raising taxes. we have not seen anything like this with governments deliberately raising taxes on a scale since the early 1930's. they should be going in the opposite direction. they are putting more burdens on the private economies. host: somebody who may be in your income group wrote an op- ed about a month ago and this is part of it. i want to get your reaction.

guest: in terms of income and what people effectively pay in tax rates, people and higher incomes pay effective tax rates three times those earning middle incomes in this country. salaried income versus capital gains gets confused. capital gains are no sure things. it is a high-risk proposition. there has always been a lower rate for capital gains.

you would see this economy crater and hope of investment and go by the boards. bill clinton lowered the tax rates. to reverse that trend, that was a bad decade, the 1970's. we have seen that in other countries. raise the rates and you get less investment and a lower standard of living. host: do you think the debt ceiling should play into the fiscal cliff negotiations? guest: it looks like it is going to do so. i was surprised to hear the december 31 deadline. people are taking income this year in anticipation that rates may crop next year.

whether it is december 31 or march 1, the clock is putting that in play. there are sensible things that can be done on the debt ceiling crisis. take social security trust funds and pay benefits for three years or more. the reserves are in junk, not marketable iou's to the treasury department. they should be turned into marketable bonds. it can sell the bonds and continue to make the benefit payments. should have been done in a long time ago. if a company had taken workers monies for pensions and spent

the money. if you put that in a not marketable iou, you would be wearing big stripes today. that should be changed. host: we have a tweet from wah. guest: the answer is yes. we should focus on how we get this economy moving again. can reform this hideous tax code. i have been in favor of a simple flat tax. a family of four would pay no federal income tax on their first $46,000 in income.

no tax on savings. if you make the money, you pay tax on it. at the lobbying would go by the boards. it has been amended 14,000 times. nobody knows what is in the thing, not even the irs. host: steve forbes is our guest. there is the cover of his newest book. it was published this year. he was interviewed earlier this year about this book. the interview is about 30 or 40 minutes. you can watch the full interview online. steve in wisconsin on the

republican line is our first caller. caller: good morning. my question to you is -- nobody will not address the issue of the bureaucracy. you go on line and let that the department of energy or the department of education and the number of employees they have. we do not need all that. they can cut the number of employees in half and we would have real savings. nobody will address these issues. i'll hang up. guest: when you have a budget in washington, it is hard to cut back politically. if you do, people say you are against the were the goal.

this worthy goal, that worthy goal. there was a british historian in the 1950's. after world war i, britain had the largest navy in the world and they reduced the size of the navy. the laid-off sailors and dock workers. the agency running the navy was getting bigger as the navy was getting smaller. he made the discovery -- the size of a bureaucracy has nothing to do with the amount of work the bureaucracy does. it will grow unless it is reined in. the bureaucracy was getting bigger. if you get that kind of bloat, get in trouble and you change or go out of business.

ronald reagan said the closest thing to immortality is a government agency. caller: good morning, everybody. do you think capitalism and privatizing is withdrawing the money from the united states? they charge outrageous rates when the government could have maintained the prisoners cheaper. blackwater getting outrageous amounts of money to do things for the government. think that is draining our money. the money% withstood and that is why we are falling off the cliff. guest: it goes on the subject of crony capitalism.

that is businesses that are dependent on government contracts. that is not free markets. if people can compete, that's fine. too often these cases are non- bid contracts and you get disasters like solyndra. meritocracy verses cronyism. meritocracy is like a company like apple. if you like them, apple does well. with cronyism, you become politically connected.

cronyism is something we have to fight and get real competition and free markets. host: in the book, there are about 50 different taxes that the federal government has currently. accounts receivables tax, cigarette tax, corporate income tax. host: etc., etc. ralph in illinois. caller: merry christmas. losing ground in a dozen wars and by outgoing a path for free

medicine and replacing imported wood -- host: i think we got your point. do you have a position on the so-called war on drugs? guest: i shake my head a little bit. many of the advocates of legalizing marijuana of those that will lead the charge like the mayor in new york against smoking. in terms of marijuana, with the appropriate warnings and the like, you can make a case for it. when you get addicted to those

things like cocaine, it is difficult to get you off of it. much harder than cigarettes and liquor. you have to have gradations. when people get paroled from prison, oftentimes a nuclear weapon. they go back to using drugs. do you throw them in for another five or 10 years? do you let them go? spend a night in jail. there is a lot of gradations on this thing. that debate will be joined. in terms of medical marijuana, there's an element of marijuana that i do not understand they cannot extract that part of it

that people in pain can get those properties that ease the pain without having to put that smoke in your lungs. host: the think speaker boehner it should be reelected when the new congress convenes? guest: i am not happy with the performance of the whole leadership. it gets back to who would you replace him with? i did not think paul ryan has an interest in doing it. the republicans should be sitting down and asking themselves why they let the democrats define the rules of debate on the fiscal cliff. the house should have passed a bill saying you cannot use money for medicare to finance obamacare.

the plan to finance obamacare and the house should have passed a bill on that. or how about passing a bill that any reform of entitlements -- medicare and social security -- cannot involve taking away benefits from those on the system today and those about to go on the system. you can make good reforms to young people. they should have passed a tax simplification bill. host: next call comes from john in pennsylvania, republican line. caller: good morning. president eisenhower, the rate

for the top taxpayers never went below 91%. now we cannot seem to get it up to 39%. in 2001, we had the largest budget surplus ever. 10 years later it would have the largest deficit ever. in 2001, we had $5 trillion in debt. we gained $10 trillion in debt in less than 10 years. $5 trillion was because of the bush tax cuts.

guest: there were numerous tax shelters back then that were finally removed from the code under ronald reagan. hardly anyone paid that 91%. professionals and others just sheltered that income. there were repeated recessions because of the high tax rates. john kennedy proposed a rate cut and give us the great boom of the 1960's. that plus a stable dollar. we did reduce tax rates. the economy was in recession and having a sluggish recovery. the u.s. economy did nicely. problem had nothing to do with

tax rates and everything to do with the massive policy errors made by the federal reserve. we should have learned that from the 1970's 1 oil went up to $40 a barrel. we get a 20-year boom. the federal reserve went on a bender and is still doing crazy stuff today. the policy came under the republicans and democrats and a major increase in government spending came under governor bush and with barack obama. this is not a partisan thing. the federal reserve went out of control. both parties share blame for that. host: u.s. job applications

fall. host: that is just not on the associated press wire. any reaction to that? guest: we will get a real feel until after the christmas season. it is a sick market right now even out with at some good news recently. we are not creating the number of jobs we need to do.

the labor participation rate is at the lowest level since the early 1980's. a lot of people have given up and taken early retirement or applied for disability. the labor market has been shrinking. the number of jobs we have today are still several million lower than they were before the financial crisis. we are like an autumn built on the open highway. we should be going 70 miles per hour in good weather. we're going about 20 miles per hour and going about 15 miles per hour. that is not an encouraging report. 350,000 jobs a month in a good report.

we've not been able to approach that on a sustained basis. host: linda from connecticut. caller: your father was one the most fascinating people. guest: thank you. caller: the stagnation that has occurred in the income levels under $70,000 a year. how do we fix that? it is treated as a partisan problem. i would like your input on that. thank you for your time. guest: thank you. in terms of wage stagnation, when you have a weak dollar and start undermining the integrity of the u.s. dollar real wages go down.

we saw the same thing in the 1970's and 1980's. a family was doing very well. 10 years later, that family making $18,000 a year was less well-off than before making $7,000 a year 10 years earlier. you get a lower standard of living when you undermined the dollar. new businesses created. that is something that gets little attention. when you have a health care system where costs are still moving up very sharply, more of the wages go for fringe benefits rather than take-home pay. you find the dollar not go as

far as you should. the jobs of not being created as they should. more of your effective income is going for health care. no wonder people throw up their hands. host: next call is scott in georgia. caller: good morning. thank you for taking my call. my question is about -- these politicians are separating this country. the democrats and republicans do not see they are responsible for our debt.

the starving -- they spend $2 for every dollar of revenue and that is destroying our country. guest: we have a serious financial problem. we're spending more than we're taking in. the debt is high, $16 trillion. it will go up trillions and trillions more. world war ii, fighting a global war. we have not had anything like this without any major global war. that is a real problem. you deal with this not by piling on taxes. you do it by reforming the tax

code. exercise payment restrained. the federal government has not done that yet. you get a new tax code that people can understand. you have a dollar that is as good as gold. you would start to see this economy come back quickly. then you get more growth. it is a different picture. we had a disastrous situation in the 1980's.

regulation -- which began under jimmy carter, a democrat. the american economy came around back in the 1980's in the 1990's. host: a tweet, what about lowering bases on the amount of employees you have? guest: rather than trying to say if you make a tweak here, a tweak there, i would like and across the board simplification of the tax code. you get lower rates, and you would see a lot of economic activity.

we did this in the mid-1980's. the republicans wanted to cut tax rates. the democrats wanted to get rid of these tax shelters. they got together and did both. they cleaned the code out of these tax shelters. they reduced the number of brackets down to two. they had massive bipartisan support. everyone got what they wanted. a clean code, lower rates. i am hoping in the next couple of years that we will get that kind of consensus again. we clean the code, lower rates, and let the lobbyists do new things. caller: and what you think about the free trade act? and as far as unemployment that was just announced, the

unemployment is going on welfare now. it is not staying on unemployment. that is why it is looking better. guest: in terms of trade, this country is a formidable trader when barriers are reduced. we should be putting pressure on reducing trade barriers in places like china instead of worrying about the value of their currency. we should be fighting on those issues. in terms of america moving ahead, i think if we make these positive changes, like a sound dollar again, simplified tax code that people can understand, and they get more free enterprise and health care where the patient is in charge rather than third parties.

you go run this country and you feel especially among younger people, there is a lot of entrepreneurial energy raring to go. if you get a more benign environment, that energy would burst forth. host: jkl tweets in, raising the top tax rate will not make a dent in the annual deficit. money gravitates to tax write-offs and crafted loopholes. guest: that is what you are seeing happening in europe when they are raising tax rates. lower the rates, get rid of these massive deductions, and you would see a cleaner code, a less corrupt code.

host: valerie in new jersey on our line for democrats. caller: good morning. the more i listen to mr. forbes speak, i am reminded why the reasons why i have lately not been a consistent viewer of c-span anymore. they twist the truth. there is no integrity in what is said anymore. if you look at the record of spending -- mr. forbes mentioned mr. obama's spending being higher than the bush years. that is not true. the deficit which increases our debt grew so much under obama because he put both wars into the budget. george bush kept them out of the budget, was not paying for them, so things looked good.

in the first few years of the obama administration, he created more jobs than george bush did in eight years. george bush's comment was the surpluses are for spending. he put us in massive debt, left it on obama. these people sit here and watch these idiots on tv say these things are not true. and then they go and push based on what they're hearing instead of looking into the fact of the matter. host: mr. forbes?

guest: i did make mention that spending did increase dramatically under george bush. no matter how you account for the wars, domestic spending under president obama increased very substantially to the point that it is the highest it has been without a world war. that is why we're getting these massive deficits today. we have never had anything like this without a major war. you can rightly rap the knuckles of george bush, but that does not excuse president obama for what he has done. democrats and republicans share blame for what happened with the federal reserve, not calling them to account.

even though i am a republican, i am for candidates who do those things. host: c-span democrat tweets in, would your flat tax treat capital gains as income? guest: my proposal would not. if you get the rate low enough, that would be a compromise i would be happy to make. that is a kind of conversation we should be having, how we get the rate as low as possible. if you get that very low rate, i will be a supporter of it. host: independence day tweets in, are you telling us you will stop investing if capital gains rate goes up to equal the ordinary income rate? guest: it is not a matter what

we do in our own business, media has gone through a real convulsion. in terms of when you make an investment, the reward goes down, and that is what happens when you raise the capital gains tax. in the 1970's we had a decade of stagnation. america went from a stagnating nation to the forefront in terms of technological innovation. i do not want to see us lose that again. host: one more tweet, once capital gains are taxed at the same rate as income, investors will still invest -- will not change a thing.

guest: that depends what the rates are. history shows that to be true time and time again. whether the democrats institute the cuts, or whether the republicans do it, you can see the results. some countries around the world that have left of center governments have massively simplified their tax code, put in flat tax rates. revenues have mushroomed. host: the next call comes from santa elena, texas. caller: can somehow every state verify the people from health care, medicare, medicaid to be sure the people qualify?

i did not know if i am right or wrong -- if we give medicare and medicaid to people who just come from other nations, no matter where, and they qualify -- we have a problem with medicaid and medicare. can we do something about it? we have a lot of intelligent people. with everybody working together, we can do something. host: mr. forbes? guest: the challenge for medicare and medicaid is not immigrants. in recent years, the amount of illegal immigration has dropped sharply. the real challenges we have with medicaid in particular is that the program is under-reimbursing

providers of health care to the point where a lot of doctors, a lot of hospitals, clinics do not want to take medicaid patients anymore. we need a radical reform of medicaid where instead of the program we have now, we give vouchers where you can go and shop and get the best service you can, instead of having to take a handful of doctors who will treat the patients who are still on medicaid. the program we have now is headed for absolute disaster. host: james in south carolina, last call for this segment. caller: good morning, mr. forbes. on the flat tax, it is now

constitutional to take our money from our employment. i do not understand the mentality behind raising and lowering the taxes. it seems to me we're all looking for consistency. if we just took out a certain portion of our employment money, if the country did well, the government would do well. if the country did not do well, the government would have to take in less money as well. i do not understand the mentality of setting a tax rate that everyone can consistently pay each year to support the government and their spending. if they did that, the government would have a budget that they

would have to work within to pay for the things that they enact, to whatever they want to bill, the infrastructure, the programs they make into law. guest: i think james hits on the virtue of a flat tax, having a low, single rate, getting rid of all the loopholes in the tax code and having the government learn to live within its means. that would take some time, but it is eminently doable with positive reforms on the entitlement for younger people. you do not have to change the benefit formulas for those on medicare or social security or who are about to go on those systems. as younger people know, those

systems are headed for a crash. the sooner we reform them in a positive way, the better. the key to do it is not by raising taxes, but by having a low single rate and they learn to live within it. i think you'll have a much more prosperous country for it. host: let's end where we started. what do you think the best solution in your personal view and your business view is to the fiscal cliff situation? guest: aside from not doing something foolish and the next three or four days -- that is why i do not mind kicking the can down the road -- would be to follow on the concept of simpson-bowles on the tax code. removing the junk from the code, the deductions, and sharply lower in tax rates across the board. it does not get mentioned now because it is not part of the

media crisis. host: this final tweet from darrell, how big of a hit you expect the stock market is to take due to the inability of congress to act wisely? guest: i think the market is put in a lot of the nonsense we see in washington. short-term, the market is going to be treading water. there is not a lot of good news out there. in closing, i want to emphasize -- in terms of stock investing, do not try to be a timer, especially with your retirement money. timing is a loser's game. consistency wins. emotions are your enemy. people often leave the market

when things get bad. get in when things are good and get whipsawed. steadfastness is the key. eventually we will come out of this crisis. we always do. i remember when the stock market lost a lot of ground for 15 years and came roaring back. do not try to time the market. host: we have been talking with steve forbes, chair of the forbes co., and author of several books. "why big free markets are moral and why big government is not." thank you for joining us. >> we've got a special web page set up for all things related to the so-called fiscal cliff. the house coming back sunday evening about 6:30 for

legislation business. this may be a busy weekend for the fiscal cliff. we have a twitter stream from viewers and reporterers. a resource area with documents. it is there when you need it at c-span. .org/fiscal cliff. >> if we turn away from the needs of others we are lining ourselves with those forces that are bringing about this suffering. >> the white house is a pull bit and you ought to take advantage of it. >> obesity is nothing short of a public health crisis. >> i think i have little antennas that went up and told me when somebody had their own agenda. >> there is so much influence in

that office, it is a shame to waste it. >> i think they serve on a window on the past as to what is going on with the american women. >> she is really, the only one in the world they can trust. >> many of the women who were first ladies were writers. a lot of them were writers. they wrote books. >> they are in my cases more interesting as human beings as their husbands. if only if they are not first and foremost defined and limited by political ambition. >> dolly was politically savvy. >> dolly madison loved every minute of it. >> she warned her husband, you can't rule without including what women want and what they have to contribute. >> during this statement, there was a little breathless and

there was too much looking down and too much looking down. >> it was probably the most tragic of all of our first ladies. >> she later wrote in her memoir that she said i am myself never made any decision. i only decided what was important and when to present it to my husband. now, you stop and think how much power that is, it is a lot of power. >> part of the battle against cancer is to fight the fear that accompanies the disease. >> she transformed the way we look at these and made it possible for countless people to survive and flourish as a result. i don't know how many presidents have that kind of impact on the

way we live our lives. >> just walking around the white house grounds, i'm consciously reminded about all of the people who lived there before and particularly all of the women. >> first lady, influence and image, a new series on c-span. starting president's day february 18. >> and the subject of guns and background checks were part of our "washington journal" program this morning. we'll show you that night. >> on our final segment we're join bid matt bennett who is a part of the group called third way. what is third way? guest: third way is a think tank. we cover a range of issues and guns is one of the issues we

work on. host: who is part of this think tank? guest: we've got honor es and democrats in the senate and the house. host: mostly democrats. any republicans on the board? guest: on the board but we work with republicans on a lot of things. host: you work with gore? guest: yes. host: we've invited you on today to talk about some those related issues, particularly when it comes to background checks. when somebody buys a gun what is the process? guest: it depends on who you buy the gun from. if you go in a gun store or pawnshop or you buy a gun at gun show, you have to go through a

background check. this has been a law since 1993 when the brady act was passed and the system we have now has been in place since 1998. it is an instant check system. that dealer will call a number or use the internet and do a quick check on you. it takes about 90 seconds. if you are approved you can buy the gun right away or if not, you have to wait. host: if you were a gun shop owner you have to be registered with the federal government. someone walks in and says, you have i want to buy this. where does the information go? guest: you fill out a form provide bid the federal government that basically, you attest that you don't fall in one of 19 prohibited categories. you're not a convicted felony, there's a bunch of categories. then they call to make sure that is true.

generally, the dealer will call a number that the f.b.i. runs it is called the n.i.c. system. the person on the phone is an f.b.i. employee that does the check. in some states the states do that themselves but they are accessing the same dat d.a. that. host: what if you don't buy your gun from a federally registered gun shop. where kells you buy guns? guest: this is the big holes left in the brady act. if you don't buy a gun from a federally licensed dealer they don't do background checks, at the moment they can't do background checks because they don't have access to the state system. if you buy a gun from a neighbor then it is just at transaction between you and your neighbor. host: is that legal? guest: that is legal in some states. you need a permit in some

states. host: so to sell your own property -- guest: no, to buy a gun. the -- it is not on the seller on the buyer. the big problem is at gun shows. gun shows are large, they tend to be large flea market-style events where hundreds or thousands of tables where guns are for sale. right next to a dealer might be a unlicensed seller who are not doing checks and they might have a sign on the table that says no questions asked. host: regardless who you are or if you may full in one of these 19 categories -- guest: you might. you could be a drug addict, you

could be a felony, you can not buy it from a licensed seller but you can buy it from an unlicensed seller. host: what is the amount that is sold by unlicensed dealers? guest: the data is sketchy. in fact, it is was the n.r.a. and other gun rights movement have scared congress into passing rules into keeping data. we do know for sure. some estimates put it at 40% of guns by unlicensed sellers. but nobody really knows. we know the number of background checks performed. we don't know the rest.

guest: we don't have a registry of gun owners and, in fact, the rules are opposite. the rules are so strict that the f.b.i. can't keep data on its gun checks more than 24 hours. they have to purge their data every day and that includes data of people who have been prohibited from buying guns. there is other perverse things in the law. if you are on the terrorist watch list and prohibited from flying you are not in the instant check system, you are not prohibited from buying a gun unless you follow in one of those categories. host: if the f.b.i. has to purge within 24 hours, could somebody buy a gun every three days, two three days or so? are there limits on how many

guns you can buyin a year? guest: there is not a federal limit. you can buy a dozen guns or two dozen guns, you can buy as many guns as you like. host: in one stop? guest: in one stop. people often do. the way we define show is a licensed gun dealer is vague. the law says if you are in the business of selling guns you have to be in a registered dealer. there are a lot of folks who will buy a lot of guns take them to a gun show and sell them themselves that they do it as a hobby. that's how you get a lot of these unlicensed sellers at gun shows. host: what about the bureau of tobacco and fire arms you have about a $1.1 billion budget. they have fewer than 25 agentings currently and one of

their jobs is to inspect retail gun dealers in the u.s. but because of their limitations eight years between visits to stores. guest: it's a huge problem. they also have to do alcohol and tobacco. this is a massively underresourced agency and has more to do than they could possibly do it. when you have gun crime the holes become apparent very quickly. when the washington sniper incident was going on when they finally caught the perp trader and it was addition covered they got the gun from an illegal gun sell who that the a.t.f. was trying to close down but for -- did not have the resources.

host: are you or ever been a gun owner? guest: i'm not. i have spent a lot of time firing guns, i've been to many gun stores but i don't own a gun. host: how would you like to see the second amendment amended, if you would like to see it amended at all? guest: i don't think it needs to be amended i think the supreme court got it right. what they said was, look, there is a right to own a gun in this country. there is about 250 million guns in private owners that is almost a gun for every man, woman, child in the country. we have either -- we have the right to own a gun in this country. what we believe is within the

findings of the supreme court's ruling there is plenty of room for new gun laws that will help keep guns out of criminals. host: such as? guest: we have to close the loophole that is a gaping hole in the background check system. second thing we need to do and congress took a stab at this, we need to fix the background check system. there is a lot of data not in the system and that needs to be fixed. there are a variety of other things that could be done to make guns safer. we have technology that keeps your a.t.m. card safe, keeps your car being operated without a key. there are plenty of technology available to keep a gun from being operated that is stolen. that would make an enormous impact. host: we have set aside our

fourth line for gun owners. we're going to begin with a call on our gun owner line. this is shawn in texas. caller: hello. host: go ahead. caller: i plan on obeying the supreme law of the land. host: what do you mean by that? explain yourself. caller: the first step in comfy case is registration. host: is that your argument against electronic registration? caller: that's right. that would be the first step. it is against the second amendment and it is to protect yourself that is what the second amendment was for.

host: thank you sir. guest: what that is what we hear frequently. a couple of thing, first, no one is talking about ridge strering guns or gun owners at the federal level anymore. that is gone from the discussion and it is not going happen and no one thinks it is going to. there are some states, texas is not among them that require registration of guns and gun owners but that is a state-by-state basis. the supreme court said that fits within the second amendment if the states want to do that that is appropriate. there is no one talking about that. the other thing you hear is the fear of gun comfy case. that is a complete fantaty. there are 300 million guns out there. if we devoted the entire

resources for the next 15 years it would be impossible and nobody wants to. that is a dead end to the conversation. we need to talk about the smaller steps to keep guns out of the wrong hands. host: what do you think about the conversation regarding david gregory and he held up a magazine and he's being investigated? guest: i think is a much ado about nothing. apparently the folks at nbc checked to make sure it was legal and they got bad advice, i don't think it will go anywhere. host: rose, go and head with your comment or question. caller: i'm so privileged to talk to you this morning. this is an idea i've thrown around but nobody listens. i have an idea that cops even

have to account for bullets. why does anybody need 300 bullets? why can't we ration those and there's nothing in the constitution that would stop that. but this thing about the database is ridiculous. you have to have a license to own a dog or drive a car. why talk about it if we can't do? we could ration bullets, don't you think? guest: this is an idea that has been discussed and it's one way to do is tax ammunition. that is something that folks have talked about. rationing probably isn't going to work legally or politically. the way the supreme court ruled in its gun cases it said that outright bans or rationing of certain types is probably not constitutional.

not clear if you can do that with ammunition but it is probably irrell la vent because nobody in congress is willing to do that. but there is talks about making it high and making it impossible for folks to mass huge amounts of it. however, i will say, that is probably not going anywhere especially when republicans are running the house and even if democrats were in charge that would be a tough one. host: the next call is on the gun owner line. caller: hello. i was -- i wanted to ask mr. bennett whether he's concerned about, you know the murders that are taking place in chicago and chicago being such a regulated gun city. how about the "fast and furious"

program that the government was running and where was he speaking against guns back then? caller: very quickly, what kind of gun owner are you? caller: we have -- we own just hunting guns. my husband hunts and my boys like to hunt. we have just a small handgun. i don't know what you call them. caller: thanks. let's get a response on chicago very regulated when it comes to guns and "fast and furious." caller: she brings up a great point. what happens in cities like chicago, is that guns fall into the hands of criminals because they start as a legal product. guns that are manufacturing are all legal and they end up as an

illegal product when they move in interstate commerce in certain ways. chicago crime guns tend to originate in the deep south in mississippi. there is a well-known pattern where mississippi guns flow towards chicago, virginia guns go to washington, philadelphia, and new york city. so guns move from states with loose gun laws like those in the south, and into states with tougher gun laws and into the hands of criminals. it is difficult to stop this. one thing we think needs to be done is have the federal government spend more time and resources to focus on this trafficking of guns. so totally agree that something needs to be done about the illegal trafficking of guns. on "fast and furious" holder made clear that he thinkings that serious mistakes were made in the investigation and it was a horrific tragedy that some of

the guns they were using in the gun trafficking in mexico that was used in crimes that killed american agents. it does not appear that anything illegal was done, there were a few mistakes made, but in my view at least, ther on the general has been forthright about it. there are some in congress that try to politicize it but i think the questions have been answered. host: what is the best way to get gun lus for your own particular state? guest: generally state police will have information on their website. the brady act had factings on their website. there are other groups and their websites have some stuff. if you look an the f.b.i.'s website they have a lot of

information about the instant check system and you can get a lot of data and information about the system. very recent data as of november 2012. host: gene says we need to register all guns. next call comes from jeff in texas. caller: i was just wondering, back when i was a teenager, young, dumb, and stupid. i did something stupid and got a felony charge and i'm 45 they are going still hold that against me. i bow hunt because i'm not allowed to own a gun. is there ever a statute of limitations of a felony

convicted by a kid in order to purchase a gun? guest: this is a problem we hear quite a bit. people reform themselves and there is a system in place in most states and i'm pretty sure that texas has one too where the governor can grant a waiver to put you back into the pool of people that are able to obtain fire arms. but that is hard to do, it could be costly so it is difficult and this is one of the issues with the system. that being said, when the brady act was written in 1993 and when the gun control act was put in place, initially created a class of people that weren't allowed to own guns. they had to draw the line somewhere and people convicted of felony crimes, which are serious crimes, it made sense to put them in that pro hibted

pool. it is a problem for folks like you who have reformed themselves but it does keep guns out of the hands of dangerous people. host: public sizing who the gun owners are good or bad. your comment? guest: this is based on a controversy of a paper in new york that put the names and addresses of gun owners, including the police chief. my own view was that a serious mistake. for one thing, it outed some people like domestic violence victims and others who have guns and who should not have their names and addresses in the newspaper. it doesn't do anything to keep anyone safe. the people who are on that registry for if the most part are law abiding people who have done everything right. if parents have questions whether there is a gun of the home of a family where their children are going to play, they can ask those questions.

but this kind of thing doesn't do anything but anger gun owners and put some people potentially at risk. host: one thing we haven't discussed 16 million background checks in 2010 less than 1% were denied. does that figure surprise you? guest: that is pretty standard. since the instant check system went into place 900,000 people were denied being in one of these pro hibbletted classes. for the most part it is self-selecting system. most people are not going to put their names in the background check if they have a felony or they are in the prohibited classes. so it is not surprising. host: a democrat, good morning, go ahead with your question or comment. caller: good morning. my husband says this is relative to people who talk b the second

amendment. the writers of the constitution at that time, people had guns and so they did not have any contemplation that we were going to have the types of weapons and magazines for those weapons that we have now. i just wonder, to me, people who want guns should be allowed to have as many muskets as they care to have. as to other weapons, where is the legitimacy to that claim? guest: that is a question that as occupied judges and legal scholars for a long time. it is still in the mind of many, like you, what did the founder intend with the second amendment? the supreme court has ruled twice, very clearly, in their view, the constitution does in part give the right to owner a gun to an individual.

that is something that the founders could never envision. as i noted earlier, you could continue to have that argument with what the founders intended and what we ended up. there are 300 million guns in private hands. they are in almost half of the households in the united states. that argument is interesting but not really relevant anywhere because we have right to own a gun. host: from "the new york times" when law enforcement officers recover a gun workers at the bureau's national tracing center in west virginia, a windoless building, begin making their way through a series of phone calls. asking first the manufacturing then the wholesaler, then

finally the dealer to search their file toss identify the buyer of the firearm. about a third of the time the process involves digging through records of companies that have closed, in many cases searching by hand through cardboard boxes, or even water stained sheets of paper. in an age where data is available with a few key strokes the a.t.f. is forced to follow this manual routine because the idea of establishing a central data base has been rejected by lawmakers in congress who side with the n.r.a. that such a day that base poses a threat to the second amendment. guest: exactly. there are bigger problems than that. when you do a gun trace all you get is the first sale. the manufacturing can tell you where the gun went originally. we know what dealer it went do and then the dealer can tell you

where it went to but then guns change hands. most crime guns change hand several times before they are used in a crime. so usually it is a dead end. host: you hear about serial numbers being guest: it is possible for some guns to obliterate a serial number by filing it off. if that is done, it becomes impossible to trace the gun. cars now put the numbers on virtually every part. it used to be psosible to chop up a car and sell the parts, but now the vin is everywhere. caller: you hear about so many of the market suppliers out there.

now you come in to the problem of adding several numbers to every part of a rifle that i built myself. you can change out parts. you cannot control serial numbers. host: james, what was your original comment or question? caller: if people are going to buy guns, they need education. they need some training. i am not opposed to that. as a gun owner, i am concerned this is being used as a restriction to further take away gun owners' rights. i think it is education. if people are educated in firearms, there'll be less scare people out there.

guest: james is right about the issue with serial numbers on various parts. particularly assault rifles and can be reassembled in various ways. there are things that can be done. you can stamp serial numbers on

various parts of the action of the gun. most guns used in crime are handguns. those have less swappable parts. this point about education, that is certainly right. everyone would be a lot safer if all gun owners were required to go through some sort of safety training. a lot of folks do not go through training because there are no rules in most states requiring them to do so. it is very difficult to know whether the person who is purchasing a firearm and knows what they're doing with it and knows how to secure it. that is why a lot of these guns end up being used inadvertently or otherwise in crime or accidental shootings. host: a tweet, can you own a

fully automatic machine gun anywhere in the united states legally? guest: those have been illegal in united states since the 1930's. host: when it comes to a bushmaster, a handgun, or the background checks the same for all of those different types of weapons? guest: it does not matter whether you're buying a .22 or bushmaster. it is the same background check. there is the same lack of requirement for any sort of training. host: levi in nebraska. please go ahead. caller: taxing ammo is going to do nothing but make it harder for the illegal gun owners.

if you look at the statistics from the fbi, most criminals are either stolen guns where they have enough ammo to commit the crime. why don't they get rid of gun owner permits? the state can run it, charging no more than $100. you get your background check, you take a site test. you clear that, you go through the class, you go down to your local state patrol, you pay another $100, you do your fingerprinting and other background check. here is your paperwork, here is your card. you can now purchase the firearm. legal gun owners are going to do everything they can to be legal and take the right steps.

the people that do not want to do that are not going to get a gun. guest: i would be all for that. in some states, that is the process. in most, it is not. in most states, you can buy a gun with no questions asked. you do not have to pay a fee or to the state police or do anything. the system that you just described, if it was in place in all states, it would be a whole lot safer. legal gun owners virtually never use their guns improperly and virtually always keep their guns properly secured. but with the enormous number of guns we have in private hands, even the small number that do not know what they are doing could lead to the 66,000 injuries.

caller: if we're going to control anything about these gun laws, i would like to know if i can purchase a gun legally and be a gun owner, say that i could not be able to purchase a gun legally. i could go to a gun show with cash money and buy anything there i would like to have. this is just terrible. even though gun-control laws are out there, why is it if you buy one legally, you have to wait, you have to go through background checks, but you can go to a gun show and get anything you want? guest: i wish i could explain that. you put your finger on this enormous problem which we call the gun show loophole. you do not have to wait anymore. when the brady act was first passed in 1993, there were five

day waiting periods. now there is no wait. if you go to a gun store, you both for your background check, you walk out with your gun. but if you go to a gun show and find an unlicensed seller, in most states, you can buy a gun with no questions asked. host: but if you go in to a federal licensed dealer, 90 seconds? guest: just about. it does happen the legal purchasers get held up occasionally. sometimes the system gets overloaded. there's been a gigantic spike in gun sales, particularly since the newton. when obama was reelected, there was a big spike. there's been a huge spike in gun sales for the holidays. for the most part, it is 90 seconds unless something pops up

in your record. under the law, if they cannot figure it out in three business days, you get the gun. it is called a default proceed. they still can proceed even though they do not know what the resolution of the investigation is yet. host: 16.4 million background checks in 2010. less than 1% denied, but 78,000 were denied. john is a gun owner. caller: good morning. with registration, that always gives the government the ability to take your guns, as was seen in england and australia. within a few years after registration, they confiscated all the guns.

crime has soared in both places. with the gun dealers, they to keep records. they can be traced to the manufacturer. the thing to do there is put the straw buyers in jail. give them a minimum sentence per weapon. make the people responsible for taking these guns and putting them in criminals' hands. put them in jail. i do not think you should restrict firearms sales to law- abiding citizens. guest: you raised an important point about straw buyers. somebody can pass the background check and pass the gun on to somebody who cannot. you see this happening in certain gun stores where a gang banger and his girlfriend come in. she fills out the paperwork. everyone involved knows where

that gun is going. those straw buyers should be prosecuted. the gun stores, if they are looking the other way on those sales, they should be prosecuted, too. host: michelle tweets in, is this our usual knee-jerk reaction to a horrific event? do you see any chance for real reform? guest: nobody knows the answer to that yet. a lot of it will be wrapped up in congress. if they can get deals done on something, we're pretty hopeful that some action can be finally taken on guns. maybe the gun show loophole gets closed. maybe the assault weapons ban is reinstated. it depends on whether anything can get unstuck in congress. host: the atf has not had a permanent leader for six years.

guest: it is a huge problem. it is a sign of how the nra works in washington. they have done the very effective job of steering that agency by threatening its budget, trying to keep them from having a permanent director. it has been six years. neither president bush nor president obama has been able to get a permanent director. host: we have been talking to matt bennett of third way. thanks for being with us. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> all this month, we've been talking with retiring members of congress. join us later tonight for a sit- down we had recently with nebraska senator ben nelson. he served two terms and was part of the so-called gang of 14.

that is 8:00 eastern tonight here on c-span. here is a brief look. >> what is your thought about the art of compromise and how much it is valued in this city? >> it is value to talk about it. everybody back home want people to come back to washington and work together, and then they send people back here who have committed not to work together. that makes it very difficult. if you have in the senate a block of individuals who will not compromise and think compromise is a four-letter word, it becomes a very difficult to merge ideas and find compromises and accommodations in the process, and implementation as opposed to the principles. nobody is asked to compromise his or her principles. it may be how you go about doing

something, not exactly eliminating your view about one thing or another. the word compromise is overused, underutilized, and misunderstood by an awful lot of people. it does not mean throwing in the towel. i have a couple of friends like talk to about compromises. in one instance, their idea of a compromise is when i see it their way. >> you can see the entire interview with senator nelson tonight at 8:00 eastern here on c-span. 40 minutes later, interviews with two retiring house members. california republican jerry lewis, and a conversation with california democrat lynn woolsey now look at the global by the, a speech

university of athens economic professor. this is an hour and 10 minutes. [applause] >> ladies and gentlemen, france, this is a singular honor to be a guest in this temple of civic life. thanks to all the good people for making this possible, to my publisher, the staff that are manning the barricades outside. my novel is debt crisis and the future of the world economy.

i will be arguing that there is no such thing as a debt crisis. there is no debt crisis in the united states of america and europe, and there is no such thing as the debt crisis in my own country, which is nevertheless being consumed by debt. you know the joke about balloonist. the balloon has been blown off course, and at some point they manage to gain control of the balloon and lower it above a farm. the farmer comes out and looks up at the balloon and one of the balloonists says, excuse me, sir, where are we? and the farmer says, you are in a balloon. the balloonist says, he must be an economist. precisely accurate, and hopelessly useless.

we have a doctor here amongst us. imagine if you had a terrible case of a cancer patient in acute pain, and your diagnosis was, the person is experiencing a pain crisis. it wouldn't be useful. debt is a symptom of 2008, to be precise. it is what happens when a financial implosion begins on wall street, and then all sorts of dark forces break out, break loose, and they start dismantling the economic and social fabric of the world. these awful events happen once every hundred years.

our children were unfortunate enough that we had such an event a few years ago, back in 2008. let me be a little bit more precise about questions concerning debt. in this country, a whole spectrum of political opinion is pinpointing debt, especially federal debt, as a major problem. it is quite provocative, on my part, to be saying there is no such problem. that me explain why think this. after 2008, what has occurred, in this country and europe and elsewhere, is what i refer to as a twin peaks problem.

one peak is this mountain of unsustainable, and recoverable debt and irretrievable losses, primarily losses in the financial sector. one huge peak. you look at in you think, oh, my god, a debt crisis. then there is another peak behind it that is often not seen, overshadowed. but it's just as tall. it is 8 peak of huge, gigantic and savings with no place to go. the world we live in has the highest ratio of savings in the history of capitalism. we have accumulated profit and savings with nowhere to go, too fearful to be invested in productive uses, simply because of the crisis. this is the twin peaks, have been referring to.

when i say there is no debt crisis, i don't mean there is no debt. the debt is a huge problem just like a cancer patient has a problem with pain. but it is analytically unhelpful to be thinking in terms of the debt crisis. we might as well refer to the crisis we are going through as the savings crisis, a crisis caused by too much savings. you have never heard anyone from bloomberg refer to it as a crisis of a glut of money with nowhere to go, but it is, just as much as it is a crisis of debt. let's begin at the beginning. let's talk about debt. reading the mainstream outlets, newspapers, or listening to the idiotic stations like fox, you

would think that it is possible to have capitalism without debt. well, it isn't. once, it was possible to have an economy with debt that is marginal. recall feudalism. what was the process that led to the accumulation of wealth? it began with production. peasants work on the land. they produce wheat, corn, so production came first. then came distribution. that would come in and take a large part of that mountain of corn for distribution between the peasantry and the gentry. eventually, you had financialization.

the landlord would sell in the rudimentary, marginal market, his surplus. and with the money, indulge in some money lending. so you had production, distribution, and financialization. and debt creation. but financialization came at the end and was not essential for production and distribution. with capitalism, what you had was the perfect reversal of the process. so how is capitalism different than feudalism? once the peasants were thrown off the land, they became landless peasants. some were kept by the landlord and given the task to organize production.

usually, that was involved with sheep and wool. it became an international commodity. it could be exchanged for silk in india and the silk exchanged for swords in japan, and those swords would be sold back in england and the whole thing would start again. so the ex-peasant who is now running the show on a small plot of land handed over to him by the landlord would be an entrepreneur. effectively, he borrowed money from the landlord in order to pay for three things. rent of the land, wages in the form of corn, to the ex- peasants who are now wandering in the countryside knocking on doors because they don't have

direct access to land, and some machinery, shears for clipping wool. so land, labor, and capital could be purchased in advance of production, on the basis that the entrepreneur, ex- peasant has to the landlord. so debt comes first, then comes distribution of income in the form of a labor contract. it will work for so many hours and i will give you so much corn. then comes production. it was a combination of this reversal of the order from having production followed by a distribution, followed by debt, to having debt first, then distribution, then production. in conjunction with the great

improvements in technology that unleashed the powers of capitalism, and capitalism manage to produce immense wealth, and at the same time produce poverty that had never been known before. the debt is to capitalism what hell is to christianity. unpleasant, but absolutely necessary for it to work. in a sense, capitalism is about ecological economics, even though capitalists don't want to hear this. it is about recycling. we had heard of the term by the 1970's, especially about the green movement in europe. capitalism has always been recycling. the process of described is a process whereby the entrepreneur is now forced to be an entrepreneur.

the ex-peasants, they did not choose to be entrepreneurs. they had to be. they used debt. bringing it to the present, energizing the production process, producing the wealth from which he hopes that he will be able to repay the debt. the moneylenders, later the bankers. cover for the fact that he had paid wages for capital goods. hoping there is something left for him, for profit. debt is all about intertemporal recycling.

by effectively taking his hand and pushing it into the future, grabbing value that had not been generated. -- that is debt. producing the wealth, from which they hoped they would pay the debt. moneylenders, bankers. covering the fact that he had already paid wages, hoping that there would be something left for him. the fact that there is recycling -- you take a value for the future, bring it into the present, so as to develop -- delivered the body to the future. the problem with this process is once you start it and it works, you make a lot of money out of it. and history suddenly starts being measured in terms of years instead of decades or centuries, because of what capitalism did. it accelerates through technology and wealth

accumulation. it is like a machine to produce money. so, you want to use it more and more faster. the trouble is, if you overreach and take too much value from the future, you will create too much debt at some point. he will not be able to generate enough volume to deliver to the future. your recycling breaks down. there is the second problem, too. the places and the regions and sectors in which this dynamic capitalist process pushes the boundaries of technology to create wealth, those are the surplus riches. it started in manchester, in amsterdam. it is always localized. there will always be defecit regions and surplus regions. so, manchester northern england was in surplus back then. southern england was in debt. now it is the opposite. similarly, you have new york state in surplus, washington state in surplus. illinois, the dakotas in debt. missouri is your equivalent of in greece, a permanent bailout. the thing is, whereas markets are amazing institutions for

allocating existing goods and services among consumers, they are chronically bad at creating a balance between deficit and surplus regions. a geographic problem, and intertemporal. remember -- if that comes first, suddenly the money lender who later becomes a banker who later becomes wall street plays a hugely significant role in this process. the banker is the conduit of that recycling mechanism. when they get an increase in proportion as the result of their mediation of that process. given that, a failure of the banker is not the same thing as the failure of a clothes maker.

suddenly, there are two things that must happen. one, society will demand that banks are not allowed to go to the wall. then bankers are affectively given carte blanche, free money for themselves. and the whole mechanism breaks down like in 2008. it is often said in the eurozone, we made a huge error in europe of binding disparate economies by means of common currency. this is not the first time these things that happened. it happened in the united states of america. you have disparate economies in the united states of america that are bound together monetarily. missouri and washington state are as different as germany and greece. what is it that keeps the united states together? you had a great depression here in the 1930's.

things were awful. and yet, i do not believe there were any political movements to get rid of the deficit states from the united states, like there are in europe and portugal and spain and everywhere else that happens to be in deficit. the reason is, the federal- state, especially after 1929 plays the role of the regulator of surplus and deficit recycling around the land. let me give you a simple example. we are in seattle. boeing is sponsoring the lectures. when boeing goes to washington to give a contract for the next generation jet or whatever, they may get it. they do get it. but there are some things attached.

like for instance, we want a factory that builds the wings are the engines in tennessee or missouri or arizona. in the deficit regions. this is not philanthropy. this is an act of recycling surplus so the surpluses of the surplus state can continue to be created, produced. you may recall that in the 1920s, internationally, we had a gold standard. fixed exchange rates. it is like having a single economy. that gold standard creates a a degree of growth, together with the emergence of state corporations like edison that allows the bankers to run riot, to bring value to the peasant and to recycle.

and that is what led to the collapse of 1939, which was that generation's version of 2008. when that collapse happened, what you had was unsustainable debts, irresponsible banking. you had the collapse of the currency. it is what we have not now in greece, exactly the same. the generation that came to power in 1932 were exceptionally fearful of what would happen to the united states of america after 1944. because they very much feared that after the stimulus went through, after the stimulus of the second world war was over with the emergence of peace, the great depression would come back. they have learned their lessons

from the gold standard here. and they did what? they reconstituted, they reintroduced a system of global exchange. it was the bretton woods system. the dollar was the lynchpin. all the countries around the world were locked at this specific exchange rate into the dollar. but it would not repeat the error of the 1920's adjust binding together the economies of the world without having a mechanism to recycle surplus is around the world, but because it was that lack of a mechanism that brought about the disaster of the 1930's. those in power in washington in 1944 onwards were aware of the need for the surplus mechanism. interestingly, in new hampshire

in 1944, there was a big clash between people in the united states, and the british influence -- someone you may have heard of, john maynard keynes, the famous economist. both agreed that the global system of fixed exchange rates had to come with what was missing in the 1920's. and what was that? it was the global surplus recycling mechanism. but they disagreed on what one should look like. keynes represented the declining empire. the weakened, previously the dominant country recommended a multilateral policy. a world bank. full representation. different countries on its.

he referred to it as and international clearing union, what i referred to as a global surplus for cycling mechanism. and we should all agree. but the united states said, no, mate. dollar surpluses, you cannot have any. none of you have any. you are all covered in ashes. the only accredited nation on the surface of the planet is the united states of america. i agree we have surpluses. we will recycle precisely the way that we choose and we are not going to start this recycling mechanism into a kind of united nations. it is indeed the case that from 1949 until 1960 onwards, the united states of america recycle 70% of its surpluses to germany and japan. an astonishing number. 70% of the profits in the country were recycled into europe and japan.

the marshall plan is a very small part of it. i will not bore you with details. but it was not an act of philanthropy. when they go to washington, it is not a philanthropic act on the pentagon's part to instruct boeing to build. it is pragmatic. the united states federal government -- unless europe is dollarized, unless they do not have dollars to spend purchasing the net exports of those who have surpluses, then they will stop having surplus. this is the surplus recycling mechanism. thus, we have the 20 years of

the golden age. the 1950's and the 1960's. a period of immense stability very low inflation. universal growth. we had other problems. the lease from the macroeconomic point of view, it was a golden age. why did it end? because the global surplus of recycling mechanism could no longer be sustained. why? because the united states stopped having a surplus by the end of the 1960's. how can you recycle surplus if you cannot have it. enter a young turk in 1971. well, paul volcker -- that name may ring a bell. in 1971, paul volcker was an unknown working for another american. henry kissinger, who you may have heard of. before he became secretary of state.

he was still national security advisor. volcker's paper, which are when i read a few years ago, i thought it was the most remarkable document ever to emerge from washington in the last 50 years, 60 years. asked a simple question. now that america is losing its surplus, looking at the emerging economies of the world -- primarily germany and japan at the time -- how will we retain our hegemony? he said we could not recycle our own surpluses. we must recycle other people's surpluses. and this is what happened between the mid-1970's and 2008. the u.s. utilizing its trade deficit with the rest of the world has been operating like a huge vacuum cleaner.

sucking into the united states the net exports of europe, japan, and lately china. thus providing exporters -- germany, japan, or china -- with the requisite demand necessary. so, the ever expanding trade deficit was not an accident. it was a very clever way of replacing one that surplus recycling system with another. the first one, it was one where america had a surplus and america decided instead of doing what germany is doing at the moment -- which is cutting its nose to spite its face, and thereby entering into recession by cutting, cutting, cutting -- volcker as the head of the fed had a different idea.

we are going to expand our dominance and our wealth by expanding our deficit and using our deficits to provide the rest of the world with the demand which is necessary to grow their economies, even at the expense of ours. and who is going to pay for the deficit? if i have an ever-expanding deficit, the bank tells me it is game over. but if you are the united states of america and you have the reserve currency of the world, and certain other factors that i will touch upon later, what you can do is you can expand your deficit as long as you create the circumstances so that german entrepreneurs, later chinese, take their profit, which they earned and they send

it to wall street. thus closing the cycle, the recycling loop. so, effectively what we have between 1940's and 1971, 1973, you had global surpluses being recycled from united states to the rest of the world. the capitalist world. the western world. ok? so, the united states was an exporter to europe and japan. it was making profits. it was then recycling to europe and japan. so they would keep on buying. once the surplus shifted to japan, germany, and china, the idea that volcker had was a we will swap this. we will just turn it on its head. we will expand our deficit so

they can expand their profits, and thus it is self-sustaining and will finance our deficits. and this is precisely how it worked. and the trouble was -- and if you want to understand exactly how the capital gains profits were attracted to the united states -- there are some key elements. there were some key elements. one was the proliferation of blue-collar workers in united states. that kept prices low. even with the oil crisis, prices in the united states rose more slowly than they did in japan or europe. so, if you were japanese or german, the profits, where do you invest them? where do you keep them? you keep them with the low inflation rate. that is one reason. one mechanism that helps attract the capital from the rest of the world and close the loop.

wall street was another. it has an amazing capacity to create a metaphysical value out of nothing. walmart was another. is promoted the ideology of cheapness, which was calculated so brilliantly. nobody needs a gallon of pickles. i don't think it fits in a fridge. why was walmart producing it? i think it was a symbolic gesture to establish the importance of low prices as an end in themselves. and in the process squeezing labor costs here and elsewhere and creating the circumstances for profit rates to rise higher and faster to attract german and japanese capital into the united states of america.

now, what do you think bankers do when you give them $5 billion every day net? to play with, even if it is only ten minutes a day? the get $35 billion -- this is the tsunami of capitalism. on average, every working day, monday through friday on wall street, $3 billion to $5 billion net. it was flowing into wall street banks. what do they do? i will tell you what they do. they find a way to make it grow for themselves. that is what bankers do. now, we can spend countless hours discussing how they did it. one word captures the process -- financialization. i call it production of money, if you want, toxic money.

it vaporizes the contained and sophisticated and intricate forms of debt. it is being utilized by banks as a means of exchange as though it has value. it uses them, changes them amongst themselves, in order to store value that was going to the bankers in the form of bonuses. how do we define something that works as a means of exchange that has value? money. that is why they want to cash their share options. what is it? how do we define something that works as a means of exchange and total about you? money. the effective rate, bankers were given the license to print. it is as if they managed to discover an atm in the living room. it was not connected to any bank account. therefore, what did they do? if i had one of those, i would keep using it.

i cannot know what i would do, especially if nobody noticed. ok? you know, i mean, the problem with crises like the one we have now is there are multiple explanations for its. so, you hear a lot people talking about the fact that wall street bankers captured the politicians and regulators, and that is true, and thereby managed to avoid scrutiny. all the regulations set up in the 1930's were being swept away by people like mr. rubin and mr. geithner in the 1990's. awful people in the clinton administration. that is true. agreed. greed is good. hollywood movies are about greed. oliver stone tried to warn against it. instead, wall street bankers were imitating gecko, like war movies that create warmongers. at the same time, you had

another explanation which had to do with the way in which the finance tapped into computing power to create complex derivatives. all that is true. but what is underlying this and the crisis and the reason why the world economy fails to recover is that this surplus recycling mechanism -- this weird, wonderful, audacious surplus recycling mechanism from 1971 which paul volcker helped put together is the chairman of the fed in the late 1970 fell and 1980's, it broke down. in 2008, when lehman brothers broke down, and the others followed and had to be bailed out by you, what happened was

the united states of america lost its capacity to utilize its trade deficit in order to recycle other people's profits. if you look at the data analysis, and i am doing so in the context of the second edition of this book, you'll find an astonishing empirical datum. the united states is producing 30% less demand for the world's manufacturers than it was in 2007. 30% is a big reduction. at the same time, remember recycling? the rest of the world -- whereas in 2007 they were financing the united states corporations to the tune of $500 billion a year, and now they are taking out $50 billion. so, america is not producing demand for foreign manufacturers and foreign

manufacturers are not sending their profits to united states. 56% reduction in assets held by non-u.s. residents in the united states since 2008. so, that loop that operated so magnificently has broken down. the reason why europe is in such a shambles and the reason why the dragon is angst-ridden in china is we have lost about $1 trillion every year up demand for production globally. we lost it because the surplus mechanism is broken. united states found a mechanism in 1944 and recreated in the 1970's. in a very strange way, in a very unbalanced way, but nevertheless did. since 2008, we have not managed to regain our poise. the mechanism broke down.

the emphasis about the public debate on debt is the homage austerity pays to philanthropy in order to maintain what i call the new regime we live under, which is not capitalism. capitalism died in 2008. i'm an old left-winger. when i was growing up, i was having these very nice debates with liberal right wing sectarian -- they were debating about capitalism. they said capitalism is like the jungle. they said it was all about the survival of the most efficient and significant. the left argued central planning is better, you know. more just. in 1991, the soviet union died. the left died.

in 2008, capitalism died. if it is true that capitalism is a social darwinist game that gives rise to the survival of the fittest, what happens in 2008 when we have the survival of the most bankrupt? that is hypocrisy. not by banks, but by bankrupt banks. and the more bankrupt you are, greater your power for the destruction of wealth to your society. so, this emphasis on debt is nothing more than a conspiracy in order to exploit prejudice and fear. because if i am right the what we have here is a breakdown of surplus recycling, which has a symptom of lot of debt and a lot of savings, and the two wipe

out one another, this emphasis on debt is the revenge of herbert hoover and nothing more than that. if we look at one of the twin peaks and not at the other and cut down on debt, all we manage to receive its increased debt. in greece, we've had the most brutal, a substantial fiscal squeeze and in the history of humanity. if you look at the numbers, and nowhere before as the budget been squashed so savagely. and what happened to the debt? 129% to 200% of gdp. it is what happens. when you kill the cow that produces the milk, it will not produce more milk and if you keep hitting it, it will not produce more. the problem with the economy

is, we need to start recycling global surpluses again in a rational way. the great advantage of having no qualms about lying through your teeth as politicians in this country and in my country have been known to do -- the story that i have been trying to tell is quite complicated. when in being interviewed by the media, you have about 20 seconds. if you say, well, we have too much debt. we will become the slaves of the chinese like these awful advertisements -- that is completely wrong. you can just go like this. it is all over and done with.

it is a story with a beginning, middle, and end. you can tell it in 20 seconds. my story, i have been talking and fast for such a long time, and i have still not managed to piece it together fully. what i have been telling with a colleague of mine and friend -- we were trying to think of a metaphor. and the metaphor that i thought of was the global minotaur, which is the title of the book. one of the few advantages of being greek is you have a great wealth of mythologies, of myths to tell the story. by which to tell a story about the world. so, i'm going to finish off by reading one page -- i am trying

to save on paper. i have it on the phone. it is the story of the global minotaur. what i am going to read is dear to my heart. one of the great joys of publishing this book is it appeals to people who do not know anything about economics and therefore are much more sensible than we economists are. one group of gadgets from the royal college of the arts want to create an animated story out of my book, and they asked me to write the script. allow me to read the script. it is how i am going to finish. see if you can recognize in this little story, which i was just dipping into greek mythology, the broader economic story that i have been relating to your support. ok.

once upon a time in the famous labyrinth of the king's palace, there lived a creature as fierce as it was tragic. its intense loneliness matched only by the fear it inspired far and wide. you see, the minotaur had a voracious appetite which can only be satiated with flesh. the king, who secured peace, the one who enabled trade to crisscross the seas with bountiful ships and spread prosperity around the world. alas, the beast's appetite could only be satiated by human flesh. every now and then by ship loaded with young slaves was

bound to greece to deliver its human tribute to be devoured by the minotaur. a gruesome ritual that was essential for preserving the peace and producing trade and prosperity. many years later a global minotaur rose up from the ashes of the first postwar phase, the one created by america from the ashes of the war. it is there -- a form of labyrinth was greeted deep in the american economy. it of the form of the united states trade deficit which consumes the world's exports. the more the deficit grew, the greater its appetite for europe and asia as capital, and what made it truly global with its function. it took financial capital and

surplus money, and kept the cleaning german factories busy. it gobbled up everything produced in japan and later in china. and for the american owners of these distant factories, they said their profits to wall street, a form of tribute to the global minotaur. what do bankers to when such a tsunami of capital comes their way daily? between $3 billion and $5 billion every week. they find ways to make it grow on their behalf. the us in 1985, 1990's, you saw an explosion of money minting on the back of the daily capital tsunami that floated to feed the global minotaur. just like its mythological predecessor, the global minotaur has kept the economy going for decades.

until the pyramids of private money built on the tribute collapsed on their own weight. economy is simply not large enough to hold it so much private toxic money. money like a paper that burns down once the collapse begins. in this confederation, the global minotaur was wounded. while in rude health, the minotaur formed new forms of pleasure and new forms of deprivation. ample security for a few and spectacular insecurity for most. creating spectacular failures of common decency. whatever we think of the global minotaur's reign, he kept the world going and thinking its regime was stable, moderate even. even.